Japan's manufacturers turned pessimistic for the first time in six months as Europe's debt crisis and worsening global growth prospects hurt business sentiment, boding ill for the nation's economic recovery following the March earthquake. The Reuters Tankan showed that the December manufacturers' sentiment index tumbled 6 points from November to minus 5, meaning pessimists outnumber optimists. It was the third straight month of decline.
Highlighting mounting worries about the business outlook, a majority of Japanese big firms polled by Reuters expect the global economy to stagnate in the first half of 2012, with many seeing no end to the eurozone debt crisis in the near future. Bank of Japan board member Koji Ishida repeated on Wednesday the central bank's warnings that Japan will not be spared the pain if Europe's problems spill over into emerging economies, Japan's key export markets, while safe-haven demand keeps the yen strong.
European leaders are striving to forge an agreement at a summit on Friday to enforce fiscal discipline, and France and Germany want to change EU rules to impose penalties on states that exceed deficit targets to rein in the region's debt crisis. The region's efforts so far have done little to ease concerns among Japanese manufacturers at the heart of the export-reliant economy.
Other than eurozone debt woes, they are struggling to cope with prolonged yen strength, a global economic slowdown and floods in Thailand that have hit major manufacturers. "Orders from within and outside Japan are declining due to the worsening of the European and US economies as well as monetary tightening in China," one machinery firm said in the monthly Reuters Tankan survey, which is highly correlated with the quarterly BoJ tankan survey due out December 15. A poll of 400 big firms, of which roughly 250 responded, taken alongside the Reuters Tankan from November 17 to December 2. showed 71 percent anticipate European economies will slide into a recession in the first half of 2012.
Japan's economy rebounded from a recession triggered by the devastating earthquake in March but is expected to slow sharply this quarter as the outlook is clouded by a stubbornly strong yen and slowing global demand for its goods. Japanese authorities spent a record 9 trillion yen ($115.74 billion) buying currencies in its biggest-ever single-day intervention on October 31 and more low-volume follow-up buying, boosting the nation's reserves to a new high of $1.3 trillion.
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