June 19, 2020 / 5:19 AM / 22 days ago

Pandemic to sink Japan business mood to lowest since 2009 global financial crisis: Reuters poll

TOKYO (Reuters) - Business sentiment among Japan’s big manufacturers in the second quarter likely tanked to levels last seen during the 2009 global financial crisis as the coronavirus pandemic crushed global demand and paralysed factory output, a Reuters poll showed.

FILE PHOTO: An employee of Sanko Manufacturing Co. conducts shipping of the company's ventilators as the spread of the coronavirus disease (COVID-19) continues in Saitama north of Tokyo, Japan May 8, 2020. Picture taken May 8, 2020. REUTERS/Issei Kato/File Photo

The Bank of Japan’s closely watched “tankan” survey is also likely to show big non-manufacturers’ mood sinking to more than a decade-low, underscoring the sweeping economic impact of the global health crisis.

Analysts polled by Reuters expect the BOJ tankan’s diffusion index for big manufacturers to have hit -31 in the three months to June, down sharply from -8 in the first quarter survey. That would be the worst level since September 2009, when the collapse of Lehman Brothers a year earlier triggered a deep global economic downturn.

Big non-manufacturers’ index likely worsened to -18 in the June quarter from +8 three months ago, the poll showed, as lockdown measures to contain the virus forced citizens to stay home and retailers to close. That would mark the weakest level since December 2009.

“Manufacturers were hit hard by slumping overseas demand and exports,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

“Even harder hit were non-manufacturers. Sectors that were forced to close business due to state of emergency measures in April and May likely suffered devastating damage,” he said.

Both big manufacturers and non-manufacturers expect only modest improvements in business conditions three months ahead, the poll showed.

Big firms are likely to project a 2.1% increase in capital expenditure for the current fiscal year beginning in April, roughly unchanged from a 1.8% increase forecast in the March tankan, according to the Reuters poll.

Analysts are also closely watching how companies view job market conditions, as any evidence of excess labour capacity could signal rising job losses ahead.

The BOJ will release the tankan survey at 8:50 a.m. on July 1. (2350 GMT July 30).

Reporting by Leika Kihara; additional reporting by Kaori Kaneko; Editing by Shri Navaratnam

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