Japanese executives see no end to economic slide

Associated Press

TOKYO — Business sentiment in Japan worsened in the second quarter, as companies hit by weakening demand for their products in overseas markets and plunging profits continued to pare spending, a central bank survey showed yesterday.

The Bank of Japan's survey revealed that business confidence among executives at large Japanese manufacturers was minus-16 in the April-June quarter, down from minus-five in the previous three months.

It was the second straight quarter that the survey's key indicator was negative — meaning big-business officials who are skeptical that the economy will emerge from its worst postwar slowdown outnumbered those who think the economy will rebound. Sentiment is expected to improve slightly to minus-14 in the July-September period, the survey showed.

The decline in the January-March period was the first in four quarters.

The survey reflects worries that the slowdown in the United States and Europe may force consumers there to slow their purchases of Japanese products, depriving companies of a major source of profits.

It also shows concerns that weak stock prices are hurting business prospects at home, forcing some companies to cut jobs and investment in new equipment.

The index for nonmanufacturers was negative but unchanged from the previous quarter.

But the small companies indicator dropped further into negative territory, showing that the smallest businesses, which employ the majority of the nation's workers, are suffering the most despite government efforts to prop up the sector with public money.

The biggest manufacturers said they plan this fiscal year to increase spending on new machines, computers and other technology — a key driver of growth.

But, in a worrisome trend, most other companies expect to curtail spending to modernize their offices and equipment. As companies post declining sales and profits, they make fewer products and have less of a need to buy new equipment, hire more workers and increase salaries. That is expected to make Japanese, already nervous about their job prospects, less willing to spend and could further delay a recovery.