By Kaori Kaneko
TOKYO (Reuters) – Japanese big manufacturers’ confidence in the three months to March likely worsened to its lowest in over seven years, a Reuters poll found as the global spread of coronavirus batters financial markets and raises the risk of a sharp recession.
The Bank of Japan’s quarterly tankan business sentiment survey is forecast to show the headline index for big manufacturers’ confidence fell to minus 10 in March from zero three months earlier, the poll of 15 economists showed.
That would be the fifth straight quarter of falls and the worst reading since December 2012 when the index stood at minus 12, around the time Prime Minister Shinzo Abe’s government kick-started the massive “Abenomics” stimulus policies.
The sentiment index for big non-manufacturers also likely deteriorated to plus 6 in March, matching the level seen in March 2013, from plus 20 in December survey, according to the poll.
“We expect business sentiment for both manufacturers and service sector to have sharply worsened as the spread of coronavirus infection caused demand falls and supply disruptions,” said Akane Yamaguchi, researcher at Daiwa Institute of Research.
“Recession risks both in Japan and overseas increased rapidly. Companies’ mood will continue to worsen as there is no signs of the end to the infections.”
The forecasts for the central bank’s tankan mirrored an equally worrying business confidence plunge to decade lows in March in this week’s Reuters Tankan poll.
The BOJ and the Japanese government have stepped up measures to help financial markets and business tide over the health crisis. On Monday, the central bank ramped up purchases of risky assets and created a new program to deal with corporate funding strains in an emergency meeting, joining other major central banks in efforts to prevent a global recession.
The BOJ Tankan is also expected to show a darkening outlook for big manufacturers, down to minus 14 from zero, and that for non-manufacturers down to plus 2 from plus 18.
Highlighting the strain on profits, big companies were forecast to cut their capital spending plans by 1.1% for new fiscal year from April.
“Companies’ capital spending plan is expected to be conservative due to deterioration in corporate profits and uncertainty over the global economic outlook ,” said Hirotaka Yazawa, economist at Mizuho Research Institute.
The BOJ will release its tankan survey at 8:50 a.m. on April 1 (2350 GMT on March 31).
The poll also showed Tokyo’s core consumer price (CPI) index, which includes oil products but excludes fresh food prices, rose 0.4% in March from a year earlier, slowing down from a 0.5% increase in February, on oil price falls.
The coronavirus outbreak is also seen pushing down prices of hotel accommodation and travel packages, analysts said.
Tokyo CPI data will be released at 8:30 a.m. on March 27.
(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)