The results of a Bank of Japan survey released Monday show that business confidence among companies is rapidly worsening as Japanese companies feel the impact of the global economic slowdown. It seems that the Japanese economy is heading into a serious slump, which may last for a long time.
The diffusion index (the percentage of companies reporting favorable business conditions minus that of companies reporting the opposite) for large manufacturers during the last three months came to minus 24, down 21 points from minus 3 for the previous three months. This represents the second sharpest decline since August 1974 during the oil crisis. The index for carmakers fell 46 points to minus 41, the lowest since June 2002.
For the next three months, the index for large manufacturers is expected to drop an additional 12 points to minus 36 and that for large nonmanufacturers is expected to decline five points to minus 14. Large manufacturers also predict that their pretax profit during the current business year will fall 24.2 percent, the first drop in seven years.