Japan small businesses see gloom

By Yoshiko Matsushita
Bloomberg News Service

TOKYO — Japan's small businesses were pessimistic about their prospects this month as larger companies trimmed orders of supplies in response to faltering exports.

Shoko Chukin Bank's index of confidence at small businesses rose to 45 points this month from 44.4 in October, according to a monthly survey of 800 companies by the state-run lender. A reading below 50 means pessimists outnumber optimists.

Exports, the main driver of Japan's growth in the first half of the year, faltered in the third quarter. That has pared new investment at Hitachi Ltd. and other manufacturers, squeezing orders from their suppliers.

"As big companies cut down on business investment as part of cost-cutting, that has affected sentiment at smaller companies," said Eishi Yokoyama, a strategist at AIG Global Investment Corp. "The outlook for small businesses is very dim."

Japan's economic growth slowed to 0.7 percent in the third quarter from the second quarter's 1 percent gain. Export growth fell to 0.5 percent from 5.9 percent.

Confidence among small manufacturers rose to 45.3 points this month from 44 in October.

Manufacturers expect sentiment to fall next month to 44.9.

Confidence among retailers, construction companies and other non-manufacturers rose to 44.8 this month from 44.7 in October. Small and medium-sized businesses account for 99 percent of Japan's companies and 70 percent of its workers, according to Shoko Chukin.

The index hasn't risen above 50 since March 1996.