Business confidence among large companies deteriorated significantly in the April to June period due to production suspensions brought about by earthquakes in central Kyushu and on a stronger yen, a government survey showed Monday.
The index for business conditions at companies capitalized at ¥1 billion or more, compiled by the Finance Ministry and the Cabinet Office, stood at minus 7.9 on an all-industry basis, far worse than the minus 2.2 forecast when a January to March survey was released.
A Finance Ministry official attributed the weak business confidence in the April to June period to companies’ cautiousness but added that a moderate recovery trend is continuing.
The latest reading was the lowest since the April to June period in 2014, when the index came to minus 14.6 following the country’s consumption tax rate hike to 8 percent from 5 percent.
The business survey index is compiled by subtracting the percentage of companies reporting deteriorating business conditions from that of firms reporting improvement.
Looking ahead, the index for the July to September quarter is projected at 5.8 and that for the October to December period at 7.4, according to the survey.
For midsize companies capitalized at ¥100 million or more but less than ¥1 billion, the index stood at minus 7.0 for the April to June quarter on an all-industry basis, double an earlier projection of minus 3.5.
The index for small companies capitalized at ¥10 million or more but less than ¥100 million came to minus 16.9, far worse than a previous forecast of minus 6.8.
By sector, large manufacturing firms’ index for the reporting quarter came to minus 11.1, due to sluggish business for automobile parts and smartphones in the wake of the earthquakes that hit Kumamoto Prefecture and the yen’s appreciation against other major currencies, according to the ministry.
The index for large nonmanufacturing companies stood at minus 6.3, reflecting lackluster performance by financial and insurance firms, which face tough business conditions under the Bank of Japan’s negative interest rate policy.
In the current fiscal year through March, the survey expects business investment to increase 3.8 percent on an all-industry basis from a year earlier.
Nearly 13,000 companies responded to the May 15 survey.