Big manufacturers' sentiment into negative for 1st time in 7 yrs

TOKYO, April 1 Kyodo - Business sentiment among large Japanese manufacturers fell into the negative in March for the first time in seven years, weighed down by fears of the global economic fallout from the coronavirus crisis, the Bank of Japan's Tankan survey showed Wednesday. The key index measuring confidence among companies such as automobile and electronics makers dived to minus 8 from zero, the lowest level since March 2013 when it also marked minus 8. The result was stronger than the average of minus 10 forecast in a Kyodo News poll. The index for large nonmanufacturers including the service sector also fell sharply to 8 from 20 in the December survey but above the market consensus of 4. The reading for accommodation, eating and drinking services plunged to minus 59 from plus 11, posting the biggest ever decline since a survey on the sector was first taken in March 2004 due to the nosedive in the number of tourists and the fact that people are refraining from dining out amid the spread of the coronavirus, a BOJ official said. "We have heard a number of voices concerned that the spreading COVID-19 infections have slowed demand in many sectors," the official said at a briefing, adding that the virus has hit the tourism sector hard. To blunt the impact of the coronavirus pandemic on the world's third-largest economy, Prime Minister Shinzo Abe has said the government is ready to compile its "boldest-ever" stimulus package including cash handouts to struggling households and small companies. The size will be larger than the 56.8 trillion yen ($526 billion) emergency package launched during the 2008 global financial crisis, he told reporters Saturday. The number of coronavirus cases, excluding about 700 from the virus-hit Diamond Princess cruise ship, has topped 2,000 in Japan. Worldwide, more than 850,000 people have tested positive for the virus, with deaths totaling over 42,000, according to data compiled by Johns Hopkins University. "The figures in the Tankan survey were stronger than expected," said Takeshi Minami, chief economist at the Norinchukin Research Institute, citing a surge in the number of infections in Tokyo in late March. The BOJ's survey was conducted between Feb. 25 and Tuesday. "The next survey in June will show weaker figures than expected in the March survey, as people will further refrain from moving about after Tokyo Gov. Yuriko Koike indicated the possibility of lockdown," Minami added. The deteriorating economy is expected to pressure the BOJ toward further monetary easing measures. The central bank last month expanded its asset purchase program including the doubling of its annual target of exchange-traded fund buying to 12 trillion yen. However, many analysts said the BOJ is almost out of policy tools after it lowered the short-term interest rate into negative territory at minus 0.1 percent in 2016 while the country's inflation remains far below the BOJ's 2 percent price stability target. The index for big manufacturers is, however, forecast to further drop to minus 11 in the coming months amid growing concerns over the impact of the worldwide spread of the virus on production, consumption and other economic activities, as directives to stay at home have been issued in many countries to contain the virus. Among large manufacturers, 15 out of a total 16 sectors logged declines from the previous quarter. Automakers' sentiment fell to minus 17 in March from minus 11 in December while the shipbuilding and heavy machinery sector plunged to minus 29 from minus 7 as the global spread of the pneumonia-casing virus weighed on demand for their products. In the nonmanufacturing sector, the reading for services for individuals, such as theme parks and golf courses, fell to minus 6 in March from 25 in December while transport and postal industries saw a 24 point decline to minus 7 in March from December. The index of the whole nonmanufacturing sector for the next quarterly survey is expected to fall to minus 1, according to forecasts in the latest Tankan. The severe business environment for the tourism and retail industries is set to continue due to the lack of inbound tourists, as the government plans to ban the entry of foreigners from 49 countries and regions including the United States and China. The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones. Large companies -- those with capital of more than 1 billion yen ($9.3 million) -- in both manufacturing and nonmanufacturing sectors, said they plan to increase capital spending by 1.8 percent in fiscal 2020 that started Wednesday through March 2021, compared with a planned 6.1 percent increase in fiscal 2019. "The survey shows capital spending among big firms is expected to grow in fiscal 2021, but it is unclear whether the current level of the coronavirus spread is all factored in," the BOJ official said. Big manufacturers expected an exchange rate of 107.64 yen to the U.S. dollar for fiscal 2020, stronger than the 108.55 yen assumed in the previous business year that ended Tuesday. The BOJ surveyed 9,653 firms, of which 99.0 percent responded. ==Kyodo