By Jason Clenfield
March 26 (Bloomberg) -- Japan’s export collapse may push sentiment among the nation’s largest manufacturers to the lowest level in more than 30 years in March, triggering more investment cuts and job losses.
An index that measures confidence among large makers of cars and electronics will slide to minus 55 from minus 24 in December, economists predict the Bank of Japan’s Tankan survey will show on April 1. That would be the lowest since 1975 and the biggest drop since the bank started the survey. A negative number means pessimists outnumber optimists.
Toyota Motor Corp. and Sharp Corp. are expecting their first losses in decades this fiscal year as overseas sales plummet. Exports plunged an unprecedented 49.4 percent last month and the World Trade Organization forecasts that global commerce will shrink the most in the postwar era.
“Companies will make every effort to avoid going into the red two fiscal years in a row,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo. “Many will unveil major restructuring plans.”
The country’s largest firms plan to cut investment by 12 percent in the year starting April 1, which would be the biggest pullback since at least 1983, economists predict the survey will show. Business spending accounts for 15 percent of the economy and cuts could aggravate a recession that’s already shaping up to be Japan’s worst since World War II.
Gross domestic product shrank an annualized 12.1 percent last quarter, the biggest contraction among the advanced economies and the country’s sharpest decline since the 1974 oil crisis. Bank of Japan Governor Masaaki Shirakawa said last month that conditions will remain “severe” next quarter.
Slash Production
Export declines have set new records each month since November as U.S. and European consumers retrenched. The collapse in U.S. sales forced Toyota to cut thousands of jobs and slash domestic production by half this quarter. The automaker may not raise output until after September, the Asahi newspaper reported this week, citing an executive at a parts supplier.
Manufacturers have gotten some relief from the yen’s 7.1 percent depreciation versus the dollar this year. The currency shot up 23 percent in 2008, adding to the woes of companies already reeling from the plunge in overseas sales. Honda Motor Co. says every one-yen gain against the dollar cuts its operating profit by 18 billion yen ($190 million).
The recession has so far been slow to take its toll on domestic consumers and the service companies that rely on them. Private consumption fell 0.4 percent last quarter from the previous three months, compared with an unprecedented 13.8 percent decline in exports.
Non-Manufacturing
Economists predict sentiment at the country’s large non- manufacturers will fall to minus 26 in the March survey from minus 9 previously. While that result would be the worst since the central bank started tracking the data in 1983, it’s only half as bad as the reading for manufacturing confidence.
“The decline in demand is coming from abroad -- not from within Japan,” said Naomi Fink, Japan strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo. Unlike in the U.S., where millions of jobs have been lost and households are in debt, Japanese consumers are not in a crisis, she said.
While profit at Japanese manufacturers fell by 94.3 percent last quarter, earnings at service companies dropped 35 percent and some firms are seeing profits rise. Oriental Land Co., operator of Tokyo Disneyland, forecasts a 30.6 percent jump in profit this fiscal year. Sales at Fast Retailing Co., Japan’s biggest clothing store, rose 4.2 percent in February.
Downturn Deepened
Record declines in exports and factoryproduction haven’t triggered job losses of the scale seen in the U.S., where the unemployment rate jumped to 8.1 percent last month. Japan’s jobless rate has risen only 0.3 percentage point to 4.1 percent since the downturn deepened in October.
Still, a prolonged slump in overseas markets could exacerbate job losses in coming months and chip away at consumer spending, economists said. The World Trade Organization this week forecast that global trade will drop 9 percent this year, the worst in the postwar era.
“Private consumption has provided some ballast to this economy,” said Randall Jones, head of the Japan desk at the Organization for Economic Cooperation and Development in Paris. “That’s probably going to weaken in quarters ahead.”
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Posts
No comments:
Post a Comment