A recent survey illuminating the state of business conditions in Japan during the first quarter reveals a stark outlook for corporations, particularly among smaller enterprises. The Ministry of Finance reported that the business conditions survey index for large companies, defined as those with capital exceeding 1 billion yen, plummeted to 2 in the first quarter, a significant decline from 5.7 recorded in the fourth quarter of the previous year. This downturn reflects a broader sense of pessimism among large manufacturers, with their index dipping notably to negative 2.4 in the first quarter, down from a positive 6.3 in the prior quarter.
Additionally, the index for large non-manufacturers also saw a decrease, falling to 4.1 from 5.4. The plight of medium-sized companies is equally concerning; those with capital between 100 million and 1 billion yen reported a decline in their business conditions index to 0.7 in the first quarter, a drop from 3.8 in the fourth quarter.
Smaller companies, defined as those with capital between 10 million and 100 million yen, faced significant challenges as their index plummeted to negative 12.7 this quarter, down from negative 4.7 previously. Examining domestic economic conditions, the survey revealed that the index for large corporations registered 3.1 in the first quarter, a decline from 4.2 in the fourth quarter.
Medium-sized companies experienced a similar downturn with the index falling to negative 2.3 from a positive 1.4, and smaller companies reported an alarming drop from negative 11.7 to negative 17.7. Furthermore, Japanese enterprises conveyed a cautious outlook for the fiscal year 2025, which commenced on April 1, 2024, expecting sales and profits to be less robust compared to fiscal 2024.
This cautious forecast indicates a potential downturn in the business climate as firms brace for ongoing economic challenges..