TOKYO, July 1 (AFP): Japanese business confidence slumped to the lowest level in more than four years on worries about soaring raw material costs, a weaker economy and a stronger yen, the central bank said today.
Top executives have grown more pessimistic about the outlook for profits and remain cautious about ramping up investment in new plants and factories, the results of the Bank of Japan's closely watched Tankan survey showed.
Confidence among major manufacturers tumbled to five in June from 11 in March, according to the survey of more than 10,000 companies.
It was the third straight quarterly decline, pushing sentiment down to the worst level since September 2003 when the index stood at one.
Top manufacturers predicted a further deterioration in the headline index to a figure of four in September.
The index represents the percentage of firms experiencing favourable business conditions minus the percentage of those seeing unfavourable conditions.
Confidence has fallen sharply from a two-year high of 25 seen in December 2006 but it is still much higher than a low of minus 38 struck six years ago.
Sentiment among big non-manufacturers slipped to 10 in June from 12 in March, with confidence among small and mid-sized firms also deteriorating, the survey showed.
Japan's corporate sector has been a major driving force of a recovery in the world's second-largest economy after years in the deflation doldrums.
Helped by a weak yen and brisk exports, companies have enjoyed record earnings in recent years and expanded their global production facilities.
But firms are growing more cautious about ramping up spending on new plants and equipment due to soaring raw material costs and a weaker global economy, raising fears Japan's economic recovery could stall temporarily.
