Slumping stock prices, a rising yen and higher oil prices dampened the business confidence of major companies in the April-June period, sending the key confidence index to the lowest level in four quarters, according to a government survey released Wednesday.

The index of business conditions at companies capitalized at 1 billion yen or more came to 1.8 on an all-industry basis, down from 6.1 for the previous quarter for the second straight quarter of deterioration, according to the survey of 11,673 firms conducted jointly by the Cabinet Office and the Finance Ministry.

The reading, worse than the 8.3 the companies projected in the January-March survey, was the lowest since the 0.9 marked in the April-June quarter last year.

The day the poll was taken, May 25, the Nikkei stock average closed at 15,693.75, the dollar traded at 112.67 yen and the benchmark oil price was quoted at $71.07. Those figures compare with a 16,101.91 stock average, 116.63 yen for the dollar and $62.26 for oil on Feb. 24, the day before the previous survey was conducted.

According to the latest survey, the index for large manufacturers came to 1.4 in the April-June period, down from 3.1 in the previous quarter.

The index is compiled by subtracting the percentage of companies reporting deteriorating business conditions from that of firms reporting improvement.

Among manufacturers, the index for automakers and auto parts manufacturers fell to minus 9.9 from plus 23.6, apparently hit by the yen’s appreciation against the dollar.

A stronger yen makes Japanese exports more expensive in dollar terms. Exporters’ profits also suffer when the yen strengthens because it cuts overseas revenues when they are converted into the Japanese currency.

The index for major nonmanufacturers eased to 2.0 from 7.9.

The index for the construction sector dropped to minus 10.7 from plus 22.4, partly affected by rising material prices.

For midsize companies — capitalized at 100 million yen or more but less than 1 billion yen — the all-industry business confidence index slumped to minus 1.5 from minus 0.8.

The index for small companies — capitalized at 10 million yen or more but less than 100 million yen — worsened to minus 17.9 from minus 11.4.

Looking ahead, the business confidence index for large companies is projected at 13.6 for the July-September quarter and 12.0 for the October-December quarter.

The index for midsize companies is forecast at 8.2 for the July-September quarter and 10.4 for the following quarter.

The index for small companies is estimated at minus 7.6 for the July-September quarter and minus 2.8 for the three months following.

Companies of all sizes forecast an 8.8 percent increase in capital spending in fiscal 2006 from the previous year, a turnaround from an 8.7 percent contraction projected in the previous survey.

Manufacturers plan to expand capital spending by 16.3 percent and nonmanufacturers by 4.6 percent in fiscal 2006.

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