The Bank of Japan's quarterly Tankan survey, released Wednesday, finds that the nation's companies remain deeply pessimistic. However, the poll results were slightly better than most economists' forecasts.
The latest Tankan survey shows that Japanese corporate confidence has plunged to its lowest level in almost three years.
It appears that Japanese executives' hopes for an export-led economic recovery faded after the September 11 terrorist assaults in the United States. The global downturn deepened after those attacks, forcing Japanese companies to cut jobs and lower production.
The Tankan survey gauges the difference between companies saying that economic conditions are favorable and those that say conditions are unfavorable. A negative number means that more companies have a gloomy outlook.
This quarter, the large manufacturers' index fell to -38 from -33. The report shows that companies in the retail and services industries also think the economic situation will continue to deteriorate.
Richard Jerram, with investment bank ING Barings in Tokyo, says that while the figures are slightly better than he and other economists expected, they indicate that the government's economic reform efforts so far are ineffective. "To me it is not at all clear that the government has an economic program. There appears to be no ideology behind the reforms they are trying to promote. There is no vision of the type of economic structure that they are trying to create a few years down the line," Jerram said. The survey comes less than a week after the government said the economy had fallen into its fourth recession in a decade, shrinking at an annualized rate of 2.2 percent in the three months to September.
While the overseas appetite for Japanese exports has dropped off dramatically, at home, consumption is also weak. Record unemployment appears to be discouraging people from spending money.