Business sentiment among large Japanese manufacturers in June plunged to the lowest level since June 2009 due to the economic fallout from the novel coronavirus pandemic, the Bank of Japan’s tankan survey showed Wednesday.
The key index measuring confidence among companies including carmakers and electronics firms plummeted to minus 34 from minus 8 in March, marking the lowest number since the 2008-2009 global financial crisis. The result was weaker than the average of minus 31 forecast in a Kyodo News poll.
The global spread of COVID-19 has forced many manufacturers in the country to temporarily halt production due to the disruption of supply chains and falling demand for products, with all 16 sectors logging declines from the previous quarter.
Sentiment among automakers crashed 55 points to minus 72 in June, the second-weakest figure since June 2009 when it posted minus 79, due to falling demand for products around the world.
“We received many opinions (from the companies surveyed) that falling demand for automobiles has weighed on a wide range of manufacturing sectors in the country such as the iron and steel industry,” a BOJ official said.
The domestic production of eight major domestic automakers in May fell a record 61.8 percent from a year earlier to 287,502 vehicles due to factory closures and weak demand, the companies said Monday.
The deterioration stemmed primarily from the fact that people refrained from actively going out, even after the government completely lifted a nationwide stay-at-home request in late May.
The BOJ decided at its June policy meeting to further boost its ¥75 trillion ($700 billion) corporate support measures to ¥110 trillion, in line with the government’s ¥31.91 trillion second extra budget to spur the country’s economy, including new programs focusing on assistance for small businesses.
However, the tankan survey showed many companies remain in a severe economic environment amid concerns over a possible second wave of the virus, despite the efforts made by the central bank and the government.
The index for large nonmanufacturers, including the service sector, dived to minus 17 from 8 in the March survey, compared to the market consensus of minus 18.
The deterioration stemmed primarily from the fact people refrained from going out, even after the government lifted stay-at-home requests in Hokkaido and the Tokyo metropolitan area in late May.
The reading for accommodation, food and beverage services tanked to minus 91, the weakest figure since a poll of the sector was first done in March 2004, while the index for services for individuals, such as theme parks and golf courses, logged a record minus 70, due to a sharp decline in inbound tourists to the nation and sluggish consumer spending, the BOJ official said.
Among 12 nonmanufacturing categories, only the retailing sector posted a rise from the previous quarter with a reading of 2 against minus 7 in March.
Demand grew for online shopping and some electronics, such as personal computers needed for teleworking, amid government requests for people to stay at home, the official said.
As for the outlook, the index for large manufacturers is expected to slightly recover to minus 27 in the coming months amid expectations that the spread of virus infections will be somewhat contained, though many companies remain cautious about a possible second wave, the official added.
The reading of the whole nonmanufacturing sector for the next quarter survey is expected to rebound to minus 14, according to forecasts in the latest tankan.
The tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.
Large companies — those with capital of more than ¥1 billion — in manufacturing and nonmanufacturing, said they planned to increase capital spending by 3.2 percent in fiscal 2020 through March 2021, compared with the previous year.
Big manufacturers expected an exchange rate of ¥107.87 to the U.S. dollar for fiscal 2020, almost unchanged from the ¥107.98 assumed in the March survey.
The BOJ surveyed 9,577 companies, of which 98.9 percent responded.