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Sentiment among large Japanese companies plunges in 1Q 2019

Survey shows drop in manufacturing amid overseas slowdown, but outlook is brighter

TOKYO -- Slowing overseas economic growth has large Japanese companies feeling glum, according to survey results released by the government on Tuesday.

The Business Survey Index of large companies across all industries stood at minus 1.7 in the first three months of 2019. That is a 6-point drop from the October-December period of 2018, the largest decrease since the first quarter of 2016.

It is the first negative reading in three quarters. A negative reading means there are more companies that think business conditions are getting worse than there are that think things are improving. The survey was conducted on Feb. 15.

The uncertain outlook of the Chinese economy and ongoing trade tension with the U.S. have led some Chinese businesses to hold back on investment and production, weighing on sentiment in Japan. The Business Survey Index for Japan's manufacturing sector, which relies heavily on exports, dropped to minus 7.3 from positive 5.5.

But the outlook is more positive. Among large companies, the second quarter forecast is minus 0.3, and the period from July to Sep. is plus 5.7.

The brighter outlook comes as uncertainty from the U.S. government shutdown fades, and China puts stimulative economic policies in place. There will also be a rush of demand ahead of an increase in Japan's sales tax scheduled for this fall, making companies a bit more optimistic, said Takeshi Minami of Norinchukin Research Institute.

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