Most companies now say economy leveling off

Kyodo News

Nearly 76 percent of major companies surveyed by Kyodo News say the economy is “leveling off” — a sharp rise from the 27 percent who replied likewise in the previous poll in August, results compiled Sunday show.

The survey, which covered 110 leading Japanese companies, found that 84 saw the economy as leveling off and that only 12 believe the economy is gradually expanding, compared with 74 out of 107 polled five months ago.

The results confirm that concerns about the economy are rapidly building as the dollar continues to plummet against the yen and stimulus measures wear off.

With the debt-ridden government reluctant to make drastic use of fiscal policy to shore up the economy, corporate profits could decline, prompting reductions in investment and payrolls, which may weaken the broader economy further, some analysts say.

In a multiple response question asking executive to list negative factors affecting the economy, 75 companies referred to the yen, 58 cited the future course of the U.S. economy, and 31 noted the weakening effects of economic stimulus.

Asked how they would deal with the dollar-bolstered yen, 33 firms said they will try to respond by cutting costs and 19 said they will boost overseas procurement of raw materials.

Nine companies, however, said they would respond by moving production abroad, reaffirming that Japan could suffer a hollowing out of its vaunted manufacturing industry if the limping dollar keeps the yen strong.

As for their economic outlook, 75 respondents out of 110 said the economy will level off for the time being.

Asked when they expect the economy to enter full recovery, 55 companies said late 2011 and 23 said 2012, while 10 said the economy isn’t likely to enter a steady recovery path until 2013.

Meanwhile, 83 companies said profits will increase either sharply or slightly in fiscal 2010, which ends March 31, but only 38 predict an increase in profits in fiscal 2011 because fears are growing that the economy will suffer another slowdown and weigh on corporate performance in the coming year.

The survey also found that 56 companies expect asset bubbles to burst in some emerging economies, such as China and India, in 2011 or the next couple of years.