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. Last Updated: 07/27/2016

Survey Shows Japan Sinking Further

TOKYO -- Japanese business confidence worsened in December from the previous quarter, a Bank of Japan survey showed Monday, giving little backing to officials who had been saying the economy was close to bottoming out.

"It is premature to judge that the economy has bottomed out," said Yasunari Ueno, chief market economist at Fuji Securities.

The bank's quarterly survey of corporate sentiment among major manufacturers had a diffusion index of minus 56, while that for major nonmanufacturers was minus 41.

The diffusion index measures the percentage of companies reporting favorable business conditions minus those reporting unfavorable conditions. A negative reading means pessimistic firms outnumber optimistic ones.

"The numbers ... confirmed that business conditions continued to worsen," said Mamoru Yamazaki, a senior economist at Paribas Capital Markets. Most economists said the survey results are still far from supporting bullish comments by government officials, notably Economic Planning Agency Minister Taichi Sakaiya, that the economy's decline was reaching a floor.

"I don't detect any signs of 'embryonic movement.' There is a gap between how some in the government view the economy and how we see it," added Paribas' Yamazaki.

Sakaiya, a former best-selling novelist, has recently coined the term "embryonic moves" in suggesting an imminent upturn in economic activity.

The head of the Bank of Japan's research and statistics department declined to endorse Sakaiya's optimism.

"If you look at the retail sector and public works-related sectors, it is a fact that there are various movements. But I cannot say whether this is an embryonic movement or not," Shosaku Murayama told a news conference after the survey's release.

The survey also showed government economic stimulus packages announced in April and November were not enough to brighten sentiment among business managers.

"I think basically corporations feel the impact of the economic packages will be limited," said Kazuhiko Ogata, a senior economist at ABN Amro.

But some economists said the survey's forecasts for March, when the next survey will be conducted, showed there is light at the end of the tunnel. For March, both major manufacturers and non-manufacturers expect an improvement in sentiment.

"What we are seeing now in the current quarter is that the economy has seen its worst. What we are going to see is a gradual improvement," said Michael Lockrow, an economist at Thomson Global Markets.

But others said the March forecasts were merely firms' wishful thinking.

"Back in the September [survey], businesses had also forecast an improvement in December," said Akio Makabe, general manager of financial market research at the Dai-Ichi Kangyo Research Institute, noting that December results were below the firms' forecasts.