Japanese manufacturers are increasingly nervous, a major business survey showed yesterday, as sagging demand at home and abroad is compounded by fears over the effects of a nasty territorial spat with China.
The Bank of Japan’s (BOJ) quarterly tankan survey found sentiment among large manufacturers fell to minus three last month, from minus one in June.
The figures represent the percentage of firms saying business conditions are good minus those saying they are bad and are a key measure used by the BOJ in formulating monetary policy.
Barclays Capital chief economist Kyohei Morita said the latest survey “shows that foreign demand is weak.”
“Previous data have shown exports were weaker than expected and domestic consumer spending was recovering slower than expected ... but the latest tankan points to weak foreign demand,” he said.
“Towards the end of the year, attention should be paid to how China and other overseas economies will be faring, as well as how resilient the domestic economy will be,” he said.
Japan’s automobile sector was hit by the end of government incentives for consumers to buy energy-saving cars late last month, but there still is demand for reconstruction from last year’s earthquake and tsunami disasters, he said.
Economists expect Japan’s economy to have contracted in the July-September quarter, but are divided over whether it will sink further in the following quarter.
Morita said he was expecting a little growth in October-December, while Daiwa Institute of Research economist Masahiko Hashimoto said the risk of two consecutive quarters of contraction — a recession — was growing.
“Given the economy is believed to have contracted in July-September, the risk is growing that [Japan is entering] recession unless overseas economies pick up,” he said.
Economists said any possible impact from Japan’s territorial dispute with China was not fully reflected in last month’s survey, with a majority of companies polled giving answers well ahead of the Sept. 28 deadline.
“If the problem persists, there may be additional negative impact on the sentiment of automakers, electrical machinery companies and some retailers and wholesalers” in the next survey, Morita said.
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