Business sentiment among large Japanese firms drops to 3-year low in Q4

Source: Xinhua | 2019-12-12

Business sentiment among large Japanese companies dropped to its lowest level in three years in the October-December quarter, owing largely to a consumption tax hike here coming into effect at the beginning of October, the government said in a report on Wednesday.

According to a joint survey by the Finance Ministry and Cabinet Office, the confidence index reflecting sentiment at companies here capitalized at 1 billion yen (9 million U.S. dollars) or more, stood at minus 6.2 for the reporting period, dropping from 1.1 logged for the previous quarter.

The confidence index reflects the percentage of companies surveyed reporting that conditions have worsened subtracted from companies reporting improving conditions.

The latest confidence index reading marks the lowest level since the yen's protracted appreciation against the U.S. dollar in the April-June quarter in 2016, which adversely affected export-linked companies and producers, with the former heavily reliant on the yen's weakness to boost profits made overseas when repatriated.

The April-June quarter in 2016 also saw a powerful earthquake rock Kumamoto Prefecture in southwestern Japan, which also weighed on sentiment, the government said at the time.

Sentiment among large firms looking ahead, however, is set to improve according to the survey, with the index forecasting business conditions in the three months through March next year standing at 2.0, although retreating to 1.1 in the quarter after that.

On Oct. 1, at the beginning of the reporting period, the consumption tax rate in Japan was raised from 8 percent to 10 percent, with the hike denting sentiment at big businesses here, the latest report showed.

But while the confidence index slumped in the October-December quarter, the retreat was less than the 14.6 point tumble logged in the April-June quarter in 2014, when the sales tax was increased from 5 percent to 8 percent.

As for large manufacturers, the survey showed the index stood at minus 7.8 for the reporting period, with the drop attributable to slumps in auto-oriented firms and those involved in manufacturing equipment.

The index for large non-manufacturers, meanwhile, stood at minus 5.3, owing to sales at home appliance shops and department stores dropping after the sales tax hike and a powerful typhoon lashing wide swathes off the country in October, which led to supply chains being disrupted, businesses shuttering operations and consumers unable to get to stores.

For midsize companies capitalized at 100 million yen (920,000 U.S. dollars) or more, but less than 1 billion yen (9 million U.S. dollars), the index stood at minus 10.7 for the quarter, the government said.

For small firms capitalized at 10 million yen (92,000 U.S. dollars) or more, but less than 100 million yen (920,000 U.S. dollars), the index stood at minus 16.3, on an all-industry basis, the survey, which covered 14,097 companies, showed.