Confidence at major Japanese manufacturers plunges the most in 34 years

Source: Agencies  |   2008-12-15  |     ONLINE EDITION

CONFIDENCE at major Japanese manufacturers marked its sharpest drop in 34 years, a key central bank survey showed today, further evidence that the world's second-largest economy may be headed for a deep recession as companies brace for more global turbulence ahead.

The Bank of Japan's closely watched "tankan" quarterly survey for December showed the confidence index for large manufacturers at minus 24 -- the fifth straight quarterly decline and the steepest fall since February 1975.

Japan Inc. has grown increasingly pessimistic in the last the last three months amid slumping global demand, with major exporters including Sony Corp. and Toyota Motor Corp. slashing production, jobs and profit expectations. The yen's surge to a 13-year high on Friday only adds to the pain by eroding exporters' overseas earnings.

The latest number, largely in line with economists' dire forecasts, was far worse than the minus 3 reading September survey.

The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable. The lower the number, the greater the pessimism.

Japan's economy has already contracted for two straight quarters -- the definition of a recession -- and the slowdown is worse than first thought. The economy shrank at an annual pace of 1.8 percent in the third quarter, down from the initial estimate of a 0.4 percent contraction.

Some of the country's biggest brand names are taking dramatic steps to cope. Sony last week announced plans to slash 8,000 jobs around the world, or about 5 percent of its work force in a bid to bolster its bottom line. It also lowered its full-year earnings projection 59 percent from the previous year. Toyota has also cut its net profit forecast for the year ending March 2009, projecting net profit will be a third of the previous year's earnings.