Japan’s Manufacturer Confidence

Confidence among Japanese manufacturers fell the most on record as exports collapsed, signaling the recession will extend into 2009. Sentiment among large manufacturers was minus 44.5 points this quarter compared with minus 10 points three months earlier, a survey by the Cabinet Office and Finance Ministry showed today. A negative number means pessimists outnumber optimists. The government began compiling the report in 2004.

Stocks fell on concern that a deepening global downturn will further depress sales of Japanese cars, cameras and televisions. Exports plunged an unprecedented 26.7 percent in November and Toyota Motor Corp. expects its first operating loss in 71 years in the 12 months ending March.

The outlook is worsening because not only the U.S. and Europe but also emerging economies are plunging now.

The Japanese currency’s 23 percent gain this year is compounding the misery for Toyota, Canon Inc. and Sony Corp., which are cutting output and firing workers as demand weakens and profits dwindle. Toyota this week forecast an operating loss of 150 billion yen.

Denso Corp., the world’s largest listed auto-parts maker, today lowered its full-year net income forecast by 90 percent because of falling demand from carmakers and the stronger yen.

Large manufacturers said they plan to cut capital investment for the first time since the survey began in June 2004. Spending on plant and equipment will fall 2.4 percent in the year ending March, the survey showed.

Canon said last week that it will delay construction of a factory in Nagasaki prefecture, western Japan, because of weakening sales of digital cameras.

Industrial production probably fell 6.8 percent in November from a month earlier, according to the median estimate of 36 economists surveyed by Bloomberg News.

Today’s report came a week after the central bank’s Tankan survey, Japan’s most closely watched gauge of business confidence, showed sentiment among large manufacturers dropped the most since the first oil shock in 1975. Unlike the Tankan, which measures the level of confidence, today’s survey examines the degree of change in sentiment from the previous quarter.

The economy shrank in the past two quarters, sending Japan into its first recession since 2001, and the government forecasts zero growth next fiscal yea