Japanese business sentiment worsened in March for the first time in nine quarters, a key central bank survey showed today, prompting some economists to declare a fresh recession after a decade of stop-go growth.
The Bank of Japan's (BOJ) quarterly Tankan survey underscored a sharp downturn in the world's second-largest economy that has unnerved Japan's partners and jolted the central bank into a radical monetary policy easing last month.
"The economy is falling back into recession as a result of a sharp downturn in exports," said Mr Peter Morgan, chief economist for HSBC in Tokyo.
The Tankan produced a headline figure of minus five for the closely watched sentiment diffusion index for big manufacturers, sharply down from December's plus 10. What's more, the index is forecast to decline further to minus eight by June.
The index subtracts the percentage of firms reporting unfavorable conditions from those with favorable responses. A positive reading means optimists outnumber pessimists.
But Japan's Finance Minister Mr Kiichi Miyazawa said the results of the survey were within his expectations and he saw no need for further fiscal stimulus.
The government has compiled a series of deficit-spending packages totaling some 125 trillion yen ($1 trillion) over the past decade but has failed to lift average growth over the period beyond a paltry one percent a year.
James Malcolm, an economist with JP Morgan Chase, said that despite the poorer-than-expected headline figure, companies had generally reported no dramatic deterioration in perceptions of excess employment, production capacity or inventories of unsold goods. Nor were they experiencing a credit crunch.
"Confidence is clearly turning down sharply, though there is no sign of an outright collapse in activity judging by sales and profit expectations for the new fiscal year, which remain positive," Mr Malcolm said in a note to clients.