• Kyodo News


Business confidence among large companies deteriorated further in the January-March period to hit a new record low as industries across the board faced difficulties with receding domestic and external demand amid the global economic slump, The index of business conditions at companies capitalized at ¥1 billion or more came to minus 51.3 on an all-industry basis, down 15.6 points from minus 35.7 in the October-December quarter, according to the joint survey by the Cabinet Office and Finance Ministry.

The latest figure, released Monday, set a record low for the second straight month. The government started compiling the quarterly poll in April-June 2004.

For the first three months this year, the business confidence index for large manufacturers stood at a record minus 66.0, down from minus 44.5 in the previous quarter. The index for large nonmanufacturers was a record minus 42.6, down from minus 30.5 in the October-December period.

For the first time ever in the survey, business sentiment in all 34 industries fell into negative territory. Confidence was significantly damaged among automakers, steelmakers, electric appliance makers, food and chemical firms as well as wholesalers and the transport sector.

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

The survey, conducted Feb. 25, covered 14,125 companies, of which 79.2 percent responded.

On employment, the indexes for large, midsize and small firms all indicated excess staffing for the first time.

Looking ahead, the business confidence index for large companies is projected to pick up slightly in the coming quarters to hit minus 24.8 in April-June and minus 7.0 in July-September.

But a Finance Ministry official cautioned against optimism, saying many firms in the latest survey forecast business conditions will be unchanged or could not make a projection due to uncertainty. In the upcoming quarters, their sentiment could get even worse, he said.

Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co., said the results show “extremely severe business conditions,” but he noted there are some slightly encouraging signs for the future.

“The gaps between projected business confidence figures and actual data in the January-March period were a little bit smaller than those reported in the October-December quarter. This could lead to smaller than expected declines in corporate profits,” he said.

The poll found that companies in all industries estimate a 10.3 percent fall in capital investment in fiscal 2008 from a year before, worsening from a 9.8 percent drop projected in the previous poll, and a 29.4 percent tumble in fiscal 2009 from a year earlier.

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