Business confidence dips in Japan

Business confidence among Japanese manufacturers has weakened for the first time since March 2003, the quarterly Tankan survey has found.

Slower economic growth, rising oil prices, a stronger yen and weaker exports were blamed for the fall. December's confidence level was below that seen in September, the Bank of Japan said. However, September's reading was the strongest for 13 years. "The economy is at a pause but unlikely to fall", the economy minister said. "It will feel a bit slower (next year) than this year, and growth may be a bit more gentle but the situation is that the recovery will continue," said economy minister Heizo Takenaka. In the Bank of Japan's December survey, the balance of big manufacturers saying business conditions are better, minus those saying they are worse, was 22, down from 26 in September.

Japan's economy grew by just 0.1% in the three months to September, according revised data issued this month. With the recovery slowing, the world's second biggest economy is now expected grow by 0.2% in 2004. The Tankan index is based on a survey of 10,227 firms. Big manufacturers were even more pessimistic about the first quarter of 2005; their views suggest the March reading could go as low as 15 - still in positive territory, but weaker. The dollar's decline has strengthened the yen, making Japanese exports more expensive in the US. China's attempts to cool down its fast-growing economy have also hit Japanese industry's sales abroad. Confidence among non-manufacturers was unchanged in the final quarter of 2004, but it is forecast to drop one point in the March survey. Nonetheless, Japanese firms have been stepping up capital investment, and the survey found the pace is quickening. Companies reported they expect to invest 7.7% more in the year to March 2005 than the previous year - up from expectations of 6.1% increase in the September Tankan.
