The general business mood in March has worsened for the six month in a row according to credit research firm Teikoku Databank. The diffusion index (DI) of confidence from a survey of 11,330 companies across various industries dropped 6.2 points from February to 32.5. A month-on-month drop of this magnitude has not been seen since April 2014 which recorded a 4.2 point decline.
Of the 23 industry categories, the real estate sector saw the largest dip with a 10.4 point drop to 31.6. This is almost double the 5.4 point decline seen immediately following the devastating Tohoku earthquake and tsunami in March 2011.
71.2% of real estate companies reported negative market confidence in March, up from 47.9% of respondents in February. Factory closures in China have created supply chain issues for home-builders in Japan as some key components cannot be imported. On the commercial leasing side, rental revenue from shop and restaurant tenants has started to fall.
Business sentiment in Japan is likely to continue to worsen as the global economy continues to suffer the effects of the coronavirus.
Source: Teikoku Databank, April 3, 2020.
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