Japan's central bank says business confidence at big Japanese manufacturers tumbled to its lowest level in more than a year, a result of the heavy blow dealt by the March 11 earthquake and tsunami.
But the worst may have passed, and signs point to improvement later this year. With parts shortages easing, factories are steadily restoring capacity.
The Bank of Japan's quarterly 'tankan' survey of business sentiment shows that the main index for large manufacturers dropped to -9.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavourable, with 100 representing the best mood and -100 the worst.
It is the survey's lowest level since March 2010 and a marked deterioration from three months ago, when the index stood at +6. Much of that survey was conducted before the March 11 disaster hit, so it did not fully reflect the impact of the devastation.
The earthquake and tsunami hit Japan's economy hard, damaging factories and creating a nuclear-plant emergency that Japan is still struggling to address.
The mood among big non-manufacturers fell to -5 from +3. Smaller enterprises also reported lacklustre numbers. The confidence index for medium-sized manufacturers fell to -12 from -4.
The tankan offered a more encouraging assessment of the future, adding to evidence that the world's third-largest economy is likely to recover toward the end of the year. The survey forecasts business sentiment among large manufacturers to rise to +2 over the next quarter.
Car makers in particular are predicting a dramatic jump in sentiment to +6 from -52 in today's survey. The car industry is a critical driver of manufacturing, and its fate is closely linked with the health of Japan's exports.
