Confidence among major Japanese manufacturers has plunged to its worst level since the global financial crisis, a key survey showed on Wednesday, as the coronavirus dries up global demand.
The Bank of Japan's June Tankan business survey – a quarterly poll of about 10,000 companies – showed a reading of minus 34 among big manufacturers, the lowest since June 2009 when worldwide financial shocks hammered the planet's third-largest economy.
It was the biggest quarterly drop since early that year, and even worse than analysts had feared after the index turned negative in March.
"These figures show that companies believe it will take a long time for the economy to recover," Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute, said.
The coronavirus has hit Japan less hard than many advanced nations, with fewer than 1,000 deaths and about 19,000 cases.
Nevertheless, the contagion has taken a bitter economic toll, knocking the country into its first recession since 2015.
Prime Minister Shinzo Abe has passed two record stimulus packages worth nearly $2 trillion to cushion the impact, including handing out 100,000 yen ($925) to every man, woman and child in Japan.
Unemployment is rising, albeit to a rate that would make most countries jealous. Data released on Tuesday showed the jobless level rose from 2.6% to 2.9%.
The low unemployment figure reflects a shrinking workforce given Japan's rapidly ageing population, 28% of which is 65 or over.
Analysts said millions of people – especially women – had simply left the workforce during the pandemic to care for families.
Millions are also on furlough, meaning that the unemployment data may be considerably less rosy than it looks, said Shimamine.
"One estimate says the jobless rate is actually 11% if you incorporate those on furlough," he said.
Half the revenue
Japan was struggling with the effects of natural disasters and a hike in consumption tax even before the pandemic crippled the global economy.
Once it hit, there were no mandatory lockdowns in the country, the government instead asking people to stay at home – requests that were largely heeded.
But that, coupled with a shuttering of the country's borders, battered tourism and consumer spending, especially for the hospitality industry.
Daichi Kawabata, economist at Mizuho Research Institute (MRI), said the negative sentiment expressed in the survey reflected fears that economic activity would never return to pre-pandemic levels.
"Restaurants, for example, have to keep distance between customers. That will give them only half of the revenue they had earned before," he said.
Confidence among big non-manufacturers nosedived to minus 17 from plus 8 in March, also the worst since 2009.
Among large companies in the accommodation and food industries, the confidence survey showed an eye-watering minus 91, the worst since comparative data became available in 2004.
The short-term business sentiment survey reports the difference between the percentage of firms that are upbeat and those that see conditions as unfavourable.
A negative reading means more companies are pessimistic than optimistic. It is considered to be the broadest indicator of how Japan Inc. is faring.