BL: Japan Companies Say Business Conditions Worsening (Correct)
By Lily Nonomiya
(Corrects to show current survey began in 2004.)
March 24 (Bloomberg) -- Japanese manufacturers said business conditions deteriorated from three months ago, as a surging yen and the risk of a U.S. recession clouds the outlook for the export-led expansion.
Sentiment among manufacturers with more than 1 billion yen ($10 million) in capital was minus 12.9 points this quarter compared with 5.2 three months earlier, a survey by the Cabinet Office and Finance Ministry showed today. That's the lowest since the current survey began in 2004, the government said. A negative number means pessimists outnumber optimists.
Today's report may indicate the state of business sentiment before the April 1 release of the Bank of Japan's Tankan survey, the nation's most closely watched gauge of corporate confidence. Sentiment will probably fall for a second quarter, marking the biggest drop since September 2001, according to economists surveyed by Bloomberg News last week.
``The stronger yen, high oil prices and the U.S. slowdown are lowering companies' profit expectations,'' Hideo Kumano, a senior economist at Dai-Ichi Life Research Institute in Tokyo, said before today's report was released. ``The Tankan will serve as a critical piece of information in determining the magnitude of the economy's downturn.''
A separate report from the Finance Ministry this month showed that profits fell the most in the fourth quarter since the economy emerged from a recession in 2002.
The yen, which has gained 12 percent against the dollar this year, surged to a 12-year high last week on concern that the world's largest economy is headed for a recession. A stronger currency erodes the value of exporters' overseas profits when they are repatriated into yen.
Unlike the Tankan, which measures the level of confidence, today's survey examines the degree of change in sentiment from the previous quarter.
The Bank of Japan is surveying companies through the end of this month, making the Tankan Japan's most current gauge of business confidence. The government gathered most of its responses for today's report at the end of February.
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
Last Updated: March 23, 2008 20:34 EDT
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