Worst-Ever Tankan Also Foresees Weak Earnings, Capex

TOKYO (Nikkei)--The Bank of Japan's latest tankan survey shows that corporate confidence has sunk to record-low territory, and forecasts that earnings and capital investment will fall significantly in fiscal 2009.

The diffusion index for business confidence at major manufacturers dropped a record 34 points over the past three months to minus 58, the lowest reading since the data began to be compiled in May 1974.

The grim figure surpassed even the minus 57 logged in May 1975 in the wake of the oil crisis.

Confidence eroded in all 15 manufacturing sectors. Exporters such as automakers and machinery makers have been hit particularly hard amid the global downturn, sending their diffusion indexes to record lows.

The index for big nonmanufacturers lost 22 points to minus 31 -- the sharpest drop since the data began to be compiled in 1983 -- against the backdrop of plunging wholesale orders and weak leasing activity.

Looking forward, the survey projects big manufacturers to see a 6.5% drop in sales and a 19.7% drop in pretax profit in fiscal 2009, the first time that a March tankan has forecast both figures to fall. This outlook assumes an average exchange rate of 97.18 yen per dollar.

Large manufacturers are expected to slash capital investment by 13.2%, the most dour March assessment since the forecasts began in 1975.

Meanwhile, the BOJ expects the headline diffusion index to rise 7 points in the next quarterly survey, which would make for the first improvement in sentiment in about three years.

(The Nikkei April 1 evening edition)