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Japan Inc. mired in gloom
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December 14, 1998: 3:15 a.m. ET
Business confidence slides further, firms tell Bank of Japan
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LONDON (CNNfn) - Business confidence in Japan fell again in December, according to a key Bank of Japan survey, directly contradicting comments from some government officials that the worst could soon be over for the country's ailing economy.
The bank's key quarterly "tankan" survey showed that confidence had weakened since September, despite comments from senior officials at the Economic Planning Agency that the economy was near to bottoming out.
The business condition index showed that the number of firms reporting unfavorable conditions greatly outnumber those reporting a favorable business environment. Among manufacturers the index was minus 56 while among non-manufacturers it was a little-better minus 41.
More firms are optimistic about trading conditions next March than they are today, the tankan showed. But the survey caused a plunge in the benchmark Nikkei average which tumbled more than 2 percent following publication of the poll.
West LB treasury economist Richard Hostetter said the survey showed existing business confidence was no worse than most economists expected. But he was scathing about companies' "wildly optimistic" forecasts for the future.
"We continue to see this pattern of corporations putting their faith in the Japanese government and its ability to spend its way out of recession," he said. "Firms have an ongoing perception that a few months from now everything is going to be better."
But he warned, "The government is not going to be able to make everything hunky-dory again this time around."
Hostetter said firms needed to stop putting blind faith in the government and start reflecting the reality of their situation in their inventory levels and employment numbers, both of which remain high.
"Firms are not adjusting the pace of their behavior with the reality as fast as they need to," he added.
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Bank of Japan
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