Japanese business confidence falls to 34-year low

| December 15, 2008 | 0 Comments

Japanese business confidence fell at its fastest rate for 34 years with a confidence index falling from -3 to -24 in the three months to December.

The quarterly Tankan survey by the Bank of Japan showed that the sharp rise in the country’s currency and the financial crisis have had a major impact on confidence.

The December index was broadly in line with average expectations, however, some analysts are fearing that the worst is yet to come.

Julian Jessop, chief international economist at Capital Economics, said manufacturers expect conditions to deteriorate further, to -36, in the next survey.

The country, which entered recession last month, has also been hit by weakening exports and falling corporate investment and the country’s top banker warned that the economy could continue to contract for another year.

Meanwhile, analysts have warned that a strong yen, which reached a 13-year-high against the dollar last week, could force exporters to slash more jobs and cut capital spending and output even further.

Last week, it was announced that Sony will cut 8,000 jobs globally while, Toyota said its net profit for this year will be just one third of last year’s earnings.

At the end of October, the Bank of Japan cut interest rates from 0.5% to 0.3%, the first since 2001. It was hoped that the rate cut would bring stability to the yen and to stave off a prolonged recession.

However, the Tankan results are evidence that Japan’s recession is far worse than previously anticipated.

Japan is the world’s second largest economy.

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