Business confidence of Japanese companies is deteriorating rapidly with most blaming trade conflicts between the United States and China as the major cause, an Asahi Shimbun survey showed on June 18.

According to the survey, 57 of 100 companies said that Japan’s current business conditions are at a standstill, a sharp rise from 32 in the previous poll, conducted in November 2018.

Only 32 firms replied that business conditions are expanding gradually, a large drop from 65 in the previous survey.

The number of companies that responded that business conditions are receding gradually jumped to 10 from one in the previous poll. The remaining firm said that business conditions are receding.

The survey has been conducted annually of 100 major Japanese companies in spring and autumn, with the latest taken from May 27 to June 7. Reporters interviewed management officials of nearly half those firms.

The latest survey showed that Japanese companies’ perception of business conditions has changed dramatically as the Chinese economy has slowed since around autumn 2018, and trade friction between the United States and China erupted again in early May this year.

The 57 firms that replied that business conditions are at a standstill were asked to cite up to two reasons for why they believe so. Twenty-seven cited “consumer spending.”

The replies apparently show that consumer spending has cooled due to rising food prices and the scheduled hike in the consumption tax rate from 8 to 10 percent in October, despite that wages in real terms have not risen as expected.

“Consumer spending is the foundation of the Abe administration’s growth strategy but continues to be weak. It is not strong enough to push up business conditions,” said Akiyoshi Koji, president of Asahi Group Holdings Ltd., a beer maker.

Of the 57 companies, 20 also cited “exports” as a reason for their dampened confidence. The reply apparently shows that their businesses are being impacted by decreasing exports to China.

The survey also asked the 100 firms to choose up to two items from 16 options as concerns for the Japanese economy. Seventy-four companies chose “the prospect of overseas economies.”

That was followed by 32 firms who cited “stagnation of consumer spending” and 20 companies who referred to the “consumption tax rate hike.”

As for current global business conditions, 39 firms replied that they are expanding gradually. Meanwhile, another 39 companies answered that business conditions are at a standstill.

Regarding concerns for global business conditions, 87 cited the “Chinese economy’s slowdown caused by U.S.-China trade friction.”

Toshikazu Nishimoto, president of Tokyo Steel Co., said his company is being affected.

“Investments in plants and equipment for machines and raw materials toward semiconductor-related industries in China are drastically decreasing," Nishimoto said. "The decrease is adversely affecting demand for steel products."

(This article was written by Mana Takahashi and Akifumi Nagahashi.)