Japanese Manufacturers' Confidence Falls From Two-Year High

Companies will decrease capital spending outlays.

Marking the first decline in a year, business confidence among Japan's major manufacturers fell back from a two-year high over the three months to March, the central bank reported April 2. Confidence among Japan's big manufacturers dropped to 23 in March from 25 in December, the Bank of Japan's quarterly Tankan survey showed, slightly below market expectations for a figure of 24.

A positive reading means confident firms outweigh the pessimistic ones.

The dip appears to reflect worries among Japanese companies about the health of the U.S. economy, recent financial market volatility and an uncertain outlook for the Japanese yen.

The big manufacturers forecast a further drop in confidence to 20 by June while the large non-manufacturers expect a pick-up to 23.

The survey also showed that companies are cautious about their plans for spending on new plants and equipment, which has been one of the key drivers in Japan's recovery from a slump stretching back over a decade.

The Tankan survey of almost 10,000 firms showed that all companies expect to trim capital expenditure by 0.3% on average in the current fiscal year to March 2008, after a 9.5% rise last year. Large companies in all industries plan to raise capital spending by 2.9% this fiscal year, down from an 11.9% rise last year. Analysts note, however, that Japanese firms tend to be cautious on their spending plans at the start of the fiscal year.

Copyright Agence France-Presse, 2007

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