Business confidence drops in Japan Central bank notes rapid fall in last 3 months to 5-year low.


TOKYO -- Business confidence in Japan has rapidly deteriorated in the past three months and has reached the lowest level in five years, the Bank of Japan said last week.

Economists said the report, reflecting a survey of business sentiment, indicated that a rebound of Japan's sagging economy, which optimists had expected to begin this summer,would be delayed, perhaps until next year.

The survey results reported Friday were worse than expected, said Robert Alan Feldman, director of economic research for Salomon Brothers in Tokyo. "I think it does indicate that recovery will be delayed," he said.

Officials of Japan's central bank said they were not particularly uncomfortable with the new numbers and pointed out that the results also had hopeful signs. Companies in the survey, for instance, generally reported that they expected business to improve in the fall.

A deepening Japanese economic slump could further inflame trade tensions with the United States and Japan's other trading partners.

With its economy weak, Japan's imports are slowing,causing its trade surplus to bulge. And if consumption remains weak in their home market, Japanese companies will be tempted to try to export more goods.

The report released by the Bank of Japan was the Tankan, a quarterly survey of thousands of businesses here.

The most closely watched number from the survey, an index reflecting the sentiment of leading manufacturers, dropped to minus 24 in May from minus 5 in February.

The new figure means that the number of businesses saying that business conditions are unfavorable exceeded the number saying conditions are favorable by 24 percent.

The drop in the business confidence index is one of the sharpest single-quarter drops. And the new level is the lowest since minus 27 was recorded early in 1987.

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