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Monday, 2 April, 2001, 05:36 GMT 06:36 UK
Japan slump fears rise
Bank of Japan
The survey is one of the Bank of Japan's main sources of data
A key economic survey in Japan shows a further erosion of business confidence among big manufacturers.

The Bank of Japan's quarterly "tankan" index has fallen to -5 this month, from a figure of +10 last December as more firms take a negative view of economic prospects.

Tokyo stock exchange traders
The stock market fell after the report was released
The BBC Tokyo correspondent says the fall is the latest indication that the Japanese slow-down may be heading towards a recession.

The Bank of Japan has recently cut interest rates in response to slowing economic growth, a declining stock market and fears of deflation.

The tankan survey is one of the Bank of Japan's main sources of data about the health of the economy.

Big drop

It subtracts the percentage of companies reporting unfavourable conditions from those with a more positive outlook.

The index of minus five from January to March was worse than some economists had predicted and a big drop from last December's figure of plus ten.

The survey also found that big companies were planning to cut capital spending, with further negative consequences.

Japanese companies have been hit hard by the slow-down in the United States economy.

Drastic action

Healthy exports were an important ingredient in the country's tentative recovery last year.

The Bank of Japan took drastic action last month in a bid to revive the economy and stave off the threat of deflation.

It effectively reduced interest rates to zero by pumping extra money into the financial system.

That led to some gains on the stock market in recent days but much will now depend on follow-up action by the government and its efforts to force banks to write off their heavy burden of bad loans.

A further fall in the value of the yen could also give hope to Japanese exporters by making their products more competitive in overseas markets.

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See also:

19 Mar 01 | Business
Japan cuts rates to zero
16 Mar 01 | Business
Japan admits economy has stalled
22 Mar 01 | Business
Talking up Japan's economy
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