Japan Tankan Survey Reflects Economic Pain

The mood of major Japanese firms worsened for the first time in almost two years in a central bank survey, paving the way for a likely economic contraction this quarter.

Major manufacturers‘ sentiment weakened to a plus 5 reading, better than expected but still down for the first time since March 2009 in the wake of the global financial crisis.

The Bank of Japan’s closely watched tankan survey saw big firms‘ sentiment dip to a negative reading in March, reflecting the pain from the yen’s surge to a 15-year high and the end of government stimulus measures.

After firm growth in the July – September quarter, most economists expect economic contraction in the current quarter.

The government has announced plans this week to help, planning a 5 percentage point cut in corporate taxes that will save a cumulative $7.2 billion.

The Bank of Japan has already eased its policy and implemented a $60 billion asset buying program, but may face calls for further action if the slowdown extends beyond one quarter.

Still, corporate spending has held up relatively well in Japan, as big firms plan to hike outlays by 2.9 percent by the end of the current business after a 15.5 percent drop last year.

Japanese financial market investors shook off the tankan, with the Nikkei edging down slightly by midday after hitting a seven-month high on Tuesday.

Foto: NTDTV