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Japanese Business Confidence Fades - 2003-04-04

Business confidence among Japan's major manufacturers is fading again, down for the first time in five quarters. The latest quarterly Tankan survey by the Bank of Japan reflects heightened pessimism because of the U.S.-led war in Iraq, the SARS virus and the ailing Japanese stock market, trading around a 20-year low.

According to the closely watched survey, sentiment among big manufacturers fell to minus 10 in the first quarter that ended in March, from minus nine in the previous quarter.

The index measures those companies reporting favorable business conditions against those who see unfavorable conditions. A negative number means pessimists outnumber optimists.

The survey had some bright spots. It found that Japan's big manufacturers expect to increase spending on plants and equipment for the first time in three years. There was also a slight uptick in sentiment among non-manufacturing companies.

Japan has taken a big step forward in reforming its vast postal system. A new public corporation called Japan Post has replaced the state-run postal agency that was established more than 130 years ago.

Its budgets will no longer be under government sway, giving the entity greater control over business decisions. Japan Post will manage nearly three trillion dollars in customer assets. The postal service has long offered savings accounts and insurance policies, much the way banks do.

Public Management Minister Toranosuke Katayama told reporters that Japan Post will cooperate with the private sector to offer better quality services to its customers.

But Japan Post also inherits a bloated workforce of 280,000 people, which it will slowly cut, mostly though attrition. It faces increasing competition from private companies, which are now permitted to enter the postal business.

The creation of Japan Post is part of Prime Minister Junichiro Koizumi's structural reform agenda, though it is less ambitious than his early proposals, which some old-guard lawmakers and bureaucrats had bitterly resisted.

In the auto sector, Mitsubishi Motors will recall 240,000 vehicles in Japan that have defective brakes and fuel tanks. The recall covers six models and will cost Japan's fourth largest automaker $44 million.

Mitsubishi has become more sensitive about quality control after a customer complaints scandal three years ago led to the recall of more nearly two million vehicles around the world. This time, no recall has been issued outside of Japan since no defects have been reported yet overseas.