A waiter works in a bar at First Cabin hotel, which was converted from an old office building, in Tokyo, July 3, 2015. REUTERS/Toru Hanai
November 11, 2015
By Tetsushi Kajimoto and Izumi Nakagawa
TOKYO (Reuters) – Confidence among Japanese manufacturers fell in November for a third straight month to levels unseen in about 2-1/2 years, a Reuters poll showed on Wednesday, reflecting fears that a China-led slowdown in overseas demand may have pushed the economy into recession.
The service sector mood also soured as sectors such as retail took a hit from weakness in private consumption, which accounts for about 60 percent of the economy, underscoring just how tepid economic recovery is in the absence of a growth engine.
The monthly Reuters Tankan, which closely tracks the Bank of Japan’s tankan quarterly survey, showed both manufacturers’ and service-sector sentiment is seen largely steady over the next three months, reflecting uncertainty about the outlook.
The poor poll results will be followed by government data out on Monday, which is expected to show the economy slipped back into recession through September due to a drop in capital spending in the face of weak foreign and domestic demand.
“The possibility is high that Japan has fallen into a recession. The economy will likely return to growth in the current quarter but any rebound won’t be strong,” said Yuichiro Nagai, economist at Barclays Securities.
The Reuters Tankan polled 514 big and mid-sized Japanese companies between Oct. 26 and Nov. 6, of which 260 responded.
“Chinese and ASEAN markets remain stagnant, and our domestic business related to private consumption is not performing well either,” a manager at a chemicals firm said in the survey, which companies answer anonymously.
“Orders we receive from clients are mostly linked to refurbishing old facilities and subsidy-related investment,” said a maker of electric machinery. “We hardly see the kind of production increase that is seen when the economy is booming. As such, the economy is stalling.”
The Reuters Tankan sentiment index for manufacturers fell to 3 in November from 7 in October, posting the lowest reading since minus 4 in April 2013, when the central bank embarked on its quantitative and qualitative easing drive. Materials industries such as steel took a hit from China’s slowdown. The index is seen unchanged in February.
The service sector index fell to 22 from 27 in October, the lowest since March, dragged down by wholesalers and retailers. The index is expected to slip further to 21 in February.
The Bank of Japan last month cut its economic growth and inflation projections but held off on expanding stimulus, hoping that the economy recovers well enough to accelerate inflation to central bank’s ambitious 2 percent target.
(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)