Confidence falls among Japan's small businesses

By Ann Saphir
Bloomberg News Service

TOKYO — Confidence among Japan's small businesses fell this month as a four-month decline in exports hurt prospects for companies that supply manufacturers.

Shoko Chukin Bank's index of confidence at small businesses fell to 44.4 points from 44.9 in September, according to a monthly survey of 800 companies by the state-run lender. It was the second monthly fall.

Company sentiment may fall further in coming months as a government push to speed banks' disposal of about $420 billion in bad loans makes lenders reluctant to extend new credit, analysts said.

"While the economy will muster growth in the third quarter and may even do so in the third quarter, growth is slowing," said Matthew Poggi, an economist at Lehman Brothers (Japan) Ltd., who expects growth to slow to 0.2 percent this quarter from 0.6 percent in the second quarter. "And with all this policy talk" about bad loans, "companies may become more concerned about credit."

Manufacturers' confidence fell to 44 points from 44.9. The Shoko Chukin defines small manufacturers as those with fewer than 300 employees or maximum capitalization of 300 million yen ($2.4 million).

Manufacturers expect sentiment to fall next month to 43.3.

Confidence among retailers, construction companies and other non-manufacturers fell to 44.7 from 45.

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 has held below 50 for about 6 1/2 years, meaning pessimists outnumber optimists.