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Thursday, October 1, 1998 Published at 08:24 GMT 09:24 UK

Business: The Economy

Business gloom in Japan grows

Japan Inc is gloomier than ever

Japan's closely watched Tankan survey of business confidence has shown that companies are growing more pessimistic about the economy.

The main index of confidence for large manufacturers fell to a four-year low, while small manufacturers' confidence was even worse, at an all-time low.

The survey by the Bank of Japan measures the difference between firms who say the economy is improving and those who say it is worsening. It is widely regarded as a guide to future investment intentions.

Gloom spreading

Among large manufacturers, the balance of confidence was -51 in September, as opposed to -38 in June.

And small manufacturers were even more pessimistic, with the difference between those were optimistic and pessimistic about the economy standing at -57, compared to -49 in the last quarter.

Large and small non-manufacturers were also gloomy, and all 22 industry sectors showed negative figures.

[ image: Jobs for life are going as unemployment grows]
Jobs for life are going as unemployment grows
"The figures are bad overall. Even blue-chip corporate Japan is now catching up with the smaller firms in their pessimism," said Tomoko Fujii of Salomon Smith Barney.

The figures were worse than expected, and will add to pressure on Japan for a bigger stimulus package to revive the economy.

More stimulus needed

The government has already said it will increase spending by 10 trillion yen ($75bn), and the central bank has cut interest rates to 0.25%.

But Susumu Kato, chief economist of Barclays Capital Japan, said that the figures pointed to the need for a bigger government effort to revive the economy.

"The Tankan not only shows the fall in the Japanese economy but points out the government's economic policy so far has failed to work," he said.

He predicted that the economy would decline by 3% this financial year.

In contrast the government is still officially forecasting growth of 1.9%, but it is expected to revise that to a decline of 1.8%.

The central bank said it expected capital spending to fall by 2-3% this year, but some analysts said the survey suggested a fall of 10%.

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