In Japan, business confidence has plunged to a three-year low and lending continues to fall, as the world's second largest economy enters into another recession.
A key survey on business confidence in Japan has found growing pessimism in the economy. The Bank of Japan's quarterly Tankan report says businesses continue to lose confidence in the world's second largest economy, as it enters into its fourth recession in a decade. The results were the worst in three years, but analysts say they was better than expected.
There was little news for investors to cheer, but the average Japanese corporate worker got a bit of a break when the ruling party's tax policy panel decided not to raise taxes on cigarettes and low malt alcoholic beverages. Analysts say there is little incentive to raise taxes because Japanese consumers continue to hold back from spending.
Even banks are finding a hard time getting consumers interested in loans, despite record-low interest rates. Fresh numbers for November show that bank lending has fallen for nearly four straight years now.
With consumer spending low and prices falling, government officials are scrambling to find new measures to stimulate the economy. Economics Minister Heizo Takenaka is urging the Bank of Japan to buy bonds issued by foreign governments, which would put pressure on the yen and increase liquidity in the system. "The Japanese economy is entering a new phase," he says. "And I have been telling the Bank of Japan to come up with a new approach. I want the Bank to consider what might be suitable."
In another development, Japanese Prime Minister Junichiro Koizumi has ordered his trade minister to consider full import curbs on several Chinese products such as Shiitake mushrooms, leeks and rushes, used for the making tatami mats, in order to protect local growers from cheap Chinese imports. The move could worsen an ongoing trade dispute with China. In June, Beijing retaliated by imposing punitive tariffs against Japanese cars, mobile phones and air conditioners.