Japanese manufacturers’ confidence sank in the second quarter to levels not seen since the 2009 global financial crisis, underscoring the damage the coronavirus pandemic inflicted on the export-reliant economy.
The Bank of Japan’s “tankan” survey also showed big non-manufacturers’ mood tanked to a decade low, as lockdown measures put in place through May forced businesses to shut and consumers to stay at home.
The dismal readings reinforce expectations Japan is headed for deep recession due to the fallout from the pandemic.
“Industries across the board seemed to have been hit hard by a sharp decline in demand, underscoring the extensive damage caused by the coronavirus pandemic,” said Hiroshi Shiraishi, senior economist at BNP Paribas Securities.
The index measuring big non-manufacturers’ sentiment fell 25 points to -17 in June, the worst reading since December 2009.
Big firms expect to increase capital expenditure by 3.2% in the year to March 2021, exceeding market estimates of a 2.1% gain but lower than the plans made three months ago.
“There’s a chance big firms may revise down their spending plans,” said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting. “The pace of any economic recovery will be slow.”
Among big firms, sentiment hit record lows for restaurants, hotels and machinery makers. But supermarkets, home centres and retailers saw conditions improve on demand for “stay-at-home” and teleworking goods, a BOJ official told a briefing.
Japan slipped into recession for the first time in 4-1/2 years in January-March and is set to suffer its deepest postwar slump in the current quarter.