The Tankan, a quarterly poll measuring business confidence, registers a six-point negative shift. Investments will continue to languish as long as Europe is in recession. A strong yen is a problem, limiting exports.
Tokyo (AsiaNews/Agencies) – The debt crisis affecting the United States and Europe is having major repercussions in Asia, not only in China where many fear a slowdown in production and a jump in inflation, but also in Japan. The world’s third largest economy is caught between a rising yen and growing pessimism among its core manufacturers.
According to the Tankan, the quarterly poll of business confidence issued by the Bank of Japan, large manufacturers' sentiment in the three months to December dropped to minus four from plus two three months ago. A reading of 100 would be the best mood possible, with minus 100 as the worst. The survey is one of the factors considered by the bank's rate-setters.
Analysts said sentiment could worsen if Europe's debt crisis continues. “Companies are taking more cautious views of the economy due to the one-two punch of the slowdown in overseas economies and the firmer yen," said Yoshikiyo Shimamine from Dai-Ichi Life Research Institute in Tokyo.
"Given the likelihood that overseas economies including those of emerging nations will slow further, we should be aware of the risk of big manufacturers' sentiment towards the business outlook worsening more,” he added.
Another effect of the uncertainty in Europe and the US has been that global investors have turned to the Japanese currency as a safe haven, which has pushed up the strength of the yen. For big exporters, this increased their costs and made them less competitive overseas, thus reducing the value of their overseas profits when brought back into Japan.
Although Japan was able to dig itself out of the economic crisis caused by the tsunami and the Fukushima nuclear explosion, floods in Thailand disrupted production by Japanese companies in that country.
In order to cope with the situation, which the Japanese blame on Europe, capital spending by all large companies will increase 1.4 per cent, less than the 2.5 per cent increase economists forecast.
The Bank of Japan is holding a two-day meeting on 20 December to set its benchmark interest rate, a key moment to launch the economy on a path of recovery.
In the meantime, Japanese stocks fell for a third day with Toshiba Corp losing 3.8 per cent and Nintendo Com 2 per cent. The broader Topix index fell by 1.6 per cent.
“Japan is highly vulnerable to overseas factors,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co. “Europe’s situation doesn’t seem to be moving in a positive direction, while the euro has fallen a lot against the yen—another headache for exporters."