Japan Business Survey Suggests Turnaround Will Be Sluggish

The Bank of Japan’s closely watched tankan business survey came in flat for the quarter ended in March, suggesting any turnaround in the recession-hit economy will be slow.

Pessimists outnumbered optimists as the index of confidence among large manufacturers held at minus 38, the same as for the quarter ended in December. Economists expected the index to rise to minus 35.

Confidence among retailers, banks and other non-manufacturers--which do most of their business within Japan--also was unchanged at minus 22.

The survey highlights the limitations of Japan’s reliance on exporters to end the recession. Exporters account for just 10% of the economy, and some, such as NEC Corp., are starting afresh after posting record losses and cutting tens of thousands of jobs last year.

The fact that the index didn’t decline “shows the economy is bottoming and a pickup is coming,” Yasukazu Shimizu, an economist at Aozora Bank Ltd., told Bloomberg News. “Still, the pace of recovery is seen as gradual and soft.”

But analysts also warn that the outlook for the world’s second-largest economy remains bleak because of rising bankruptcies and a mountain of corporate and government debt.

Some large manufacturers, such as Fujitsu Ltd., are confident the worst is over after cleaning house in the last year. The world’s third-biggest maker of memory chips for cell phones, which expects to have a record $2.85-billion loss in the fiscal year that ended Sunday, says it will return to profit this year as it reaps the savings from shedding about 22,000 workers.

Others, such as Sharp Corp., are counting on an increase in sales to the U.S., which slumped last year as Japan’s biggest export market slid into recession after a record 10-year expansion. Sharp’s new liquid-crystal display panel factory is running at full capacity a month ahead of schedule to meet rising demand for personal computers.

For companies doing business at home, the outlook is grimmer.