Nearly 70 percent of Japan's major companies view the economy as having leveled off and 10 percent believe it has already started to contract, affected partly by the prolonged U.S.-China trade dispute.

Responding to questions in a Kyodo News survey, most companies — including Toyota Motor Corp. and Sony Corp. — are also cautious about the economic outlook for next year, with many voicing concern about a drop in buying following the planned consumption tax hike in October as well as the spread of protectionist trade policies around the world. Among the 112 companies surveyed in July, 66 percent said the economy was flat, 23 percent said it was gradually expanding and 10 percent saw it in recession.

The results show that corporate sentiment has changed dramatically over the past year, as China's slowing economic growth in the wake of the trade war with the United States has hurt Japanese companies with large business exposure to and manufacturing bases in China. In a similar survey conducted a year ago, 77 percent of companies said the economy was expanding moderately.

In this year's survey, 46 percent said the U.S.-China trade row had or was expected to hurt their business performance, before U.S. President Donald Trump threatened on Aug. 1 to impose additional 10 percent tariffs on $300 billion worth of Chinese imports.

As for Japan's tightened controls on exports to South Korea of three industrial materials used in semiconductor and display panel production, more than a half of the companies did not know how it might affect their business or declined to comment. Only 6 percent said they supported the government's decision, though recent opinion polls show that the Japanese public is largely supportive of the tighter controls, which were announced amid the row with South Korea over thorny history-related issues.