Bank of Japan quarterly view shows economy slowing down further

While the Koizumi Cabinet is completely reluctant to take steps to boost personal spending, which is the mainstay of the nation's real economy, corporate executives are increasingly pessimistic about their business future.

The Bank of Japan's quarterly survey released on July 2 shows that the diffusion index (DI) on business sentiments plunged by 11 points to 16 below zero in the nation's major manufactures during the second quarter ending in June.

In the manufacturing industry related to electric machinery, the driving force of the nation's business upturn, the DI, the percentage of firms which feel business is favorable minus those which feel it unfavorable, declined sharply from 9 to 35 below zero due to lax exports over the period.

Among the small- and medium-sized business, the index shows a downturn in business sentiment for the second consecutive quarter in both manufacturing and non-manufacturing industries. Furthermore, when asked about their prediction for September, business runners in this sector all gave pessimistic views. This indicates that they see no sign of recovery.

Amidst the gloomy situation, the Koizumi Cabinet is now proceeding with the disposal of banks' non-performing loans faster than ever, which will necessarily cause heavy damage to small businesses, the major contributor to the nation's economy.

Commenting on the BOJ short-term view, Akahata on July 3 warned that the cabinet policy to write off bad loans will put the nation's economy on a backward track in which no brake will work. Arguing that the disposal of bad loans at this juncture means to "write off the small businesses" from the scene of the economy, it demanded measures to support small businesses. (end)