Japan's crisis of confidence

THE CRUMBLING Japanese economy has left the country's executives suffering their worst crisis of confidence in three years, dismayed at the speed of the slide into recession and nervous about the impact of the terrorist attacks in the US.

The Bank of Japan's Tankan survey of business opinion shows that confidence is at its lowest since March 1999 and the outlook for profits the worst in 25 years. Although the overall result is better than feared, with a couple of patches of misty light, the survey provides a very grim picture.

The BoJ's comparison of negative and positive responses put the index at minus 38 for December against minus 33 in September. Pre-survey polls had indicated that the outcome could have been as bad as minus 44, challenging the minus 47 result in 1999.

Battered by falling exports, shrinking domestic consumption, waning investment and the post-11 September global slowdown, manufacturers forecast that profits in the year to end-March would tumble by 34%, twice the figure anticipated in September.

One faint sign of optimism came from manufacturers of electrical goods, where the decay in confidence was less rapid, raising hopes that this sector had bottomed out. But at minus 63, three points down on September, it was also at a 25-year low.