Japan: More News On Damage To Economy Today As Car Sales Slump

Japan's central bank updates its quarterly Tankan business survey today, taking into account post-quake responses.

The original Tankan survey for the quarter was issued on Friday.

Bank of Japan officials said the results did not reflect the impact of the devastation in the northeast or of the rolling power cuts in the Tokyo area, as over 70% of the firms had responded before the quake.

Around 23.6% of the responses to the survey were received after March 11, the cut-off date and the date of the quake and tsunami.

They will be released this morning in Tokyo.

But we got two good indications late last week of the damage done to the economy with a survey of manufacturers showing a sharp fall in all sub-indexes, and figures for car sales last month which showed a 37% plunge.

Figures from the Japan Automobile Dealers Association showed that 279,389 cars (not including mini cars or trucks) were sold in March, the seventh-straight monthly decline.

That the real story was the size of the fall, thanks to the impact of the March disasters.

Japan's top three automakers all reported sharply lower sales in the month. Toyota Motor Corp's reported sales fell 45.9% in March from a year earlier, Nissan saw sales drop 37.7% and Honda's sales fell 28.3%.

Separately reported figures showed mini vehicle sales suffered a similar hit, dropping 31.6% in the month, according to the Japan Mini Vehicles Association.

The massive quake and tsunami hit auto assembly and parts manufacturing plants in northeastern Japan, causing parts shortages for domestic and some overseas car makers.

Some Toyota plants in the impacted area are back in production; others outside the region are slowing stepping up output, but are suffering from a shortage of parts.

Honda says its plants across Japan will return to production on April 11, making the shutdown roughly a month.

Friday we also reported on the sharp drop in the latest survey of manufacturing in Japan (similar surveys for China, the US and much of Europe were solid).

The Bank of Japan also meets this Thursday to look at interest rates (no change) and to perhaps reveal more on helping business ride out the disasters, especially the Fukushima crisis which could cost $US130 billion or more according to early forecasts by Bank of America Merrill Lynch.

Friday's release of the Tankan survey results was a bit anticlimactic because of the March 11 disasters.

The survey showed a small improvement in business sentiment among major manufacturers for the first time in 6 months.

The index for large manufacturers stood at plus 6 points for the first 3 months of the year. That's a 1-point increase from the previous survey.

It was the first improvement since September and is due to growing exports to emerging economies in January and February, which helped automobile and other manufactures revive production.

But the outlook wasn't so promising.

Friday's Tankan showed big manufacturers predicted business sentiment will deteriorate to a reading of 2 in the next survey in June, while large non-manufacturers expect their sentiment index to be at minus 1.

Big manufacturers and non-manufacturers plan to lower capital spending by 0.4% in the new fiscal year beginning Friday, the Tankan showed.

That compared with a 1.6% rise expected by economists.

March figures are usually soft because many companies had yet to plan new capital investment plans at the time of the Tankan poll.

The June Tankan usually contains a better view of corporate investment plans.

But this year the quake, tsunami and now the nuclear crisis will impact those plans.

Meanwhile, large manufacturers had a mildly positive outlook for their profits for this fiscal year, while non-manufacturers had a slightly negative outlook.

Large manufacturers forecast a climb of 0.6%.

Meanwhile Nissan and Ford have announced that the two companies will close some plants in the US for about one week this month due to supply disruptions stemming from the earthquake and tsunami in Japan.

Nissan says it will shut its 2 plants in Tennessee and another in Mississippi for about one week between April 8 and April 21 because of expected disruptions in components supply from Japan.

Nissan also plans to close 2 plants in Mexico for 5 days.

Ford has also announced that it will close a large vehicle plant in Kentucky for the next week due to potential delays in parts supply from Japan.

In the US, General Motors has already suspended operations for one week at its Louisiana plant.

US plants of Toyota and Honda are also being forced to reduce output because of components shortages.

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