Confidence at big Japanese firms weakens

TOKYO: Business sentiment among large Japanese companies in the January-March period fell to the lowest level in five years and nine months, affected by the coronavirus outbreak and slowing exports to China, a government survey showed yesterday.

The confidence index covering firms capitalised at one billion Yen ($9.6 million) or more stood at -10.1 in the first three months of 2020, down from -6.2 in the previous quarter for the second consecutive quarterly decline, according to the joint survey by the Finance Ministry and Cabinet Office.

The index hit its lowest point since it logged -14.6 in the April-June quarter of 2014, following the consumption tax hike from 5 to 8% on April 1 that year.

The index is calculated by subtracting the percentage of firms reporting worsening conditions from those observing improvements.

The survey covered 14,057 companies capitalised at 10 million yen or more, of which 11,413, or 81.2%, responded as of Feb 15.

A government official told reporters the impacts of the coronavirus outbreak “had already begun appearing” when the survey was conducted, referring to disrupted supply chains and a series of cancellations at hotels and restaurants as factors in worsening business sentiment.

By sector, the large manufacturers’ index was -17.2, the lowest since -23.3 in the AprilJune period in 2011, following the massive earthquake and tsunami that hit northeastern Japan in March that year.

Notable declines were seen in sentiment of sectors including fabricated metal and chemicals due to sluggish exports of petrochemical products and auto parts to China, according to the official.

As for the export slump, the official cited the influence of the virus spread, which has been “disrupting supply chains,” along with the remaining negative effects from a tit-for-tat tariff war between China and the United States.

The index for large non-manufacturers stood at -6.6, due to lacklustre sales at wholesalers, hotels and restaurants hit hard by the virus outbreak.

The index for small companies capitalised at 10 million yen or more but less than 100 million yen nosedived to -25.3 for the reporting quarter on an all-industry basis, the worst since -41.1 in the April-June period of 2011.

For mid-sized companies capitalised at 100 million yen or more but less than one billion yen, the index stood at -13.1.

Looking forward, the index forecasting business conditions for large companies in the three months through June stood at -4.4, while that for the following quarter came to +4.2.