TOKYO (Kyodo) -- Business sentiment among large Japanese companies fell to its lowest level in three years in the October-December quarter, hit by a slowdown in the Chinese economy and a consumption tax hike at home, a government survey showed Wednesday.
The confidence index covering firms capitalized at 1 billion ($9 million) or more stood at minus 6.2 in the fourth quarter of 2019, sharply down from 1.1 in the previous quarter, according to the joint survey by the Finance Ministry and Cabinet Office.
The index is calculated by subtracting the percentage of firms reporting worsening conditions from those observing improvements.
The figure was lowest since the index hit minus 7.9 in the April-June quarter in 2016 following a major earthquake in Kumamoto Prefecture in southwestern Japan and when the yen was in a period of appreciation.
Looking forward, the index forecasting business conditions in the three months through March next year stood at 2.0, while that for the following quarter came to 1.1.
At the beginning of the reporting period, Japan's consumption tax was raised to 10 percent from 8 percent.
But the figure was better than minus 14.6 in the April-June quarter in 2014, when the tax rate was increased to 8 percent from 5 percent. A government official told reporters the negative impact on the index was bigger in the previous tax hike.
By sector, the large manufacturers' index for the reporting quarter was minus 7.8, with notable declines seen in auto-related firms and equipment manufacturing makers amid a slump in demand from overseas markets, including China.
The index for large nonmanufacturers stood at minus 5.3, due partly to sluggish sales at home appliance shops and department stores following the tax hike and a powerful typhoon.
For midsize companies capitalized at 100 million yen or more but less than 1 billion yen, the index stood at minus 10.7 for October-December on an all-industry basis, while that for small firms capitalized at 10 million yen or more but less than 100 million yen came to minus 16.3.
The survey covered 14,097 companies, of which 11,490, or 81.5 percent, responded as of Nov. 15.