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Japan business confidence dives

Tokyo - Japanese business confidence in the outlook for the next three months has plunged following the March 11 earthquake-tsunami and subsequent nuclear crisis, the Bank of Japan said Monday.

The central bank re-released Friday's quarterly Tankan survey to show the breakdown in the replies it received before and after the disasters.

With most of the responses from companies received before March 11, the survey does not fully reflect the impact of the quake.

But responses from firms received after the tragedy show a sharply divergent view after the 9.0 magnitude earthquake damaged factories, caused power power shortages and led to major disruption to supply chains.

The BoJ's report on Friday showed business sentiment among large manufacturers improving to "six" in March from "five" in December, but only 23.6% of responses were received after March 11.

Monday's survey illustrated the views of firms polled after the quake, which showed the sentiment index among those major manufacturers fall to "minus two" for the April-June period.

The index measures the percentage of firms that say conditions are good minus those that say conditions are bad - meaning that any figure above zero indicates general, if cautious, optimism in the corporate sector.

The central bank considers the Tankan a key source of information when formulating monetary policy, but the March survey may not be the best indicator as most responses were received before the earthquake.

"The data don't probably include companies in regions hit by the quake and tsunami and thus are less useful to see the accurate state of the economy," Akiyoshi Takumori of Sumitomo Mitsui Asset Management told Dow Jones Newswires.

The March 11 disasters killed 12 020 people and left 15 512 missing, according to the latest national police count, with swathes of the northeast coast destroyed in a tsunami that erased entire towns.

Japan has said the cost of rebuilding after the twin disasters could hit ¥25 trillion ($309bn).

The estimate does not account for wider issues such as how radiation from the Fukushima Daiichi nuclear plant, which was crippled by the quake, will affect food and water supply, amid an ongoing contamination scare.

Aside from direct damage and disruption caused, Japan's companies also faced a volatile yen following the earthquake.

The Japanese unit soared to a post World War II high of ¥76.25 to the dollar on bets on an influx of capital by Japanese companies to aid reconstruction efforts.

A strong yen makes exporters' goods more expensive overseas and erodes companies' repatriated profits.

The Ministry of Finance, using the Bank of Japan as its agent, stepped into the market on March 18 after G7 nations agreed on a rare joint intervention to weaken the currency, which on Monday was trading at around 84 to the dollar.

The BoJ also doubled its asset-purchase programme to ¥10 trillion in the aftermath of the earthquake and pumped record funds into the financial system in a bid to soothe jittery markets.

Japan's manufacturing activity fell to its lowest reading for two years following the March 11 disaster, a survey by a private research firm showed last week.

And domestic sales of new cars, trucks and buses dropped 37% from a year earlier last month, as production and supplies to auto dealers were hit.

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