Japan’s Manufacturer Confidence Slumps Most on Record

By Toru Fujioka

Dec. 24 (Bloomberg) -- Confidence among Japanese manufacturers fell the most on record as the world’s second- largest economy slid deeper into a recession.

Sentiment among large manufacturers was minus 44.5 points this quarter compared with minus 10 points three months earlier, a survey by the Cabinet Office and Finance Ministry showed today. A negative number means pessimists outnumber optimists. The government began compiling the report in 2004.

Japan’s economy is “worsening,” the government said this week, after a report showed exports plunged the most on record in November. Toyota Motor Corp., the world’s second-largest automaker, expects its first operating loss in 71 years in the 12 months ending March 31, the company said on Dec. 22.

“The economy is a disaster,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “The outlook remains grim.”

The yen traded at 90.85 per dollar as of 9:01 a.m. in Tokyo from 90.86 before the report was published and 87.14 on Dec. 17, the strongest since 1995. The Nikkei 225 Stock Average opened 1.1 percent lower, extending the year’s decline to 44 percent.

The Bank of Japan last week cut its key interest rate to 0.1 percent to stave off a prolonged downturn and said it would start buying corporate debt for the first time to aid businesses struggling to get funding amid a credit crunch.

Tankan Survey

Today’s report comes a week after the central bank’s Tankan survey, Japan’s most closely watched gauge of business confidence, showed sentiment among large manufacturers dropped the most since the first oil shock in 1975. Unlike the Tankan, which measures the level of confidence, today’s survey examines the degree of change in sentiment from the previous quarter.

The government collected responses until Nov. 25. The Tankan was compiled based on feedback as recent as Dec. 12, offering a more current assessment of business sentiment.

The yen’s 23 percent gain this year is adding to the woes of Toyota, Honda Motor Corp. and Sony Corp, which are cutting output and firing workers as demand weakens and profits dwindle. Industrial production probably fell 6.8 percent in November from a month earlier, according to the median estimate of 36 economists surveyed by Bloomberg News.

The economy shrank in the past two quarters, sending Japan into its first recession since 2001, and the government forecasts zero growth next fiscal year.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net