TOKYO, July 1, (AFP): Japanese business confidence plunged in the months after the March 11 earthquake, turning negative for the first time in over a year, the Bank of Japan said in its quarterly Tankan survey Friday.
But firms expect conditions to improve by September and analysts said plans to increase capital spending signalled recovery hopes even amid uncertainty due to looming power shortages following the crisis at the tsunami-ravaged Fukushima Daiichi nuclear plant.
Large manufacturer sentiment in June dropped to “minus 9” from “6” in March, a plunge of 15 points and the first negative reading in five quarters.
The reading was worse than the median forecast of “minus 7” by economists polled by Dow Jones Newswires.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are bad. The survey is taken into account by the BoJ when formulating monetary policy.
The March disasters devastated entire towns along the northeast coast and left 23,000 dead or missing while wreaking havoc on Japanese industry, pushing the economy into recession in Japan’s worst crisis since World War II.

The nation’s biggest firms such as Sony and Toyota were forced to shutter plants and halt production due to shortages in electricity and parts after the disaster disrupted supply chains, sending output and exports tumbling.
The June survey showed sentiment among automakers, which were particularly hard hit due to a lack of components, plunged by a record 75 points to “minus 52”.
The strength of the yen versus major currencies is also a concern for firms, as it erodes overseas earnings when repatriated.
However, Japan’s recovery has been seen to be quicker than expected, as companies approach normal production levels ahead of earlier forecasts amid expectations that reconstruction spending will boost the economy.
The survey showed that big companies expected sentiment to improve to plus two in the next survey in September, and boost capital spending by 4.2 percent in the current fiscal year.
“Business sentiment (among major manufacturers) is continuing to recover gradually, reflecting rebounding production,” said Naoki Murakami, chief economist at Monex.
Recent data suggest the worst may be over following the disaster, say analysts. Industrial output posted the second-largest gain on record in May, with a 5.7 percent on-month rise.
Other data on Friday showed Japan’s core consumer price index rose by a higher than expected 0.6 percent in May from a year earlier, boosted by surging energy prices.
The core consumer price index, which excludes volatile food prices, rose for the second consecutive month after gaining in April for the first time in more than two years on higher energy costs.

Inflation
Meanwhile, South Korea’s inflation rate accelerated in June, the government said Friday, as higher interest rates have yet to rein in rising prices.
The country’s consumer price index rose 4.4 percent amid more expensive food and transportation compared with the same month last year, the government’s Statistics Korea announced in a monthly report. The index increased 0.2 percent from the previous month.
Inflation has now exceeded the top of the central bank’s inflation “tolerance range” for six straight months. That range is plus or minus one percentage point from its inflation target of 3 percent.
The latest figure comes a day after the South Korean government raised its inflation forecast for this year to 4 percent from the previous expected figure of about 3 percent.
Other countries in Asia are also battling rising prices. Inflation in China hit 5.5 percent in May, a 34-month high driven by double-digit surges in food costs. China is expected to announce inflation in June surged above 6 percent.

South Korea’s central bank has raised its key interest rate five times since July last year in a bid to stem price gains, though pressures are continuing.
So-called core inflation, which strips out volatile agriculture and oil prices, also rose in June, increasing 3.7 percent from the year before.
“The inflation rebound is broad-based,” Goldman Sachs economist Kwon Goohoon wrote in a report after the announcement of the June numbers.
Inflation peaked at 4.7 percent in March and slowed the following two months, coming in at 4.1 percent in May, before speeding up again in June.
After raising its benchmark base rate to 3.25 percent last month, the Bank of Korea’s rate-setting Monetary Policy Committee said that inflationary pressures were expected to continue.
The committee also expressed concern about the outlook for core inflation, saying it was possible it could keep rising.
The International Monetary Fund last month expressed concerns about inflation in South Korea and urged a further tightening, saying that “monetary conditions remain loose.”
The central bank’s rate committee next meets July 14.