Japan Press Weekly

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2016 March 30 - April 5 [ECONOMY]

Business mood for big manufacturers falls

A quarterly survey the Bank of Japan released on April 1 shows that the diffusion index (DI) on business sentiments for both large corporations and small- and mid-sized enterprises (SMEs) fell from the previous survey.

The DI for large manufacturers plunged by six points from the December survey, falling to the lowest point since the June 2013 survey. For large non-manufacturing companies, the index declined three points. Their dampened business sentiments were partially due to a sharp drop in the index for individual services and the hotel/restaurant services sector, standing at minus 16 and minus 10, respectively. The figure for SMEs and non-manufacturing SMEs also slipped four points and one point, respectively.

The Abe government has been insisting that an increase in corporate profits will eventually trickle down to the household economy. However, despite making huge profits, large corporations have only concentrated on accumulating their internal reserves. They continue to turn their backs on the need to raise workers’ wages.

The situation even led Niinami Takeshi, Suntory Holdings Ltd. CEO, to admit that the downturn trend in “consumer purchasing power is extremely severe” (Fiscal and Economic Policy Council, Mar.24).

While the trickle-down effect has been showing no sign of appearing, business confidence among large corporations began falling.

It is necessary for the government to change the present handling of the economy centering only on large corporations. It instead should preserve democracy in the economy and work to reduce poverty and social disparities.