August business sentiment hits 4-yr low on stronger yen, higher oil

Business confidence among workers with jobs sensitive to economic trends in Japan dropped in August to the lowest level in more than four years, as the corporate sector was affected by the yen's sharp appreciation and higher crude oil prices, a government poll showed Monday.

The diffusion index of confidence in Japan's current economic situation among so-called ''economy watchers'' fell to 44.1 in August from 44.7 in July for the fifth straight monthly decline, hitting the lowest level since 42.1 registered in June 2003.

The index also remained below the boom-or-bust line of 50 for the fifth month in a row.

The Cabinet Office maintained its basic economic assessment, saying for the second straight month that ''signs of weakness have been seen in the economic recovery.''

The index is based on whether respondents -- including taxi drivers and hotel and restaurant employees -- see economic conditions as improving or deteriorating compared with three months earlier. A reading of 50 indicates that those polled generally see economic conditions as flat.

A Cabinet Office official said although household spending was spurred by record-breaking heat this summer, the continued rise in crude oil and raw material prices as well as the yen's rapid advance against the U.S. dollar and the euro hurt the corporate sector.

Slow growth in the number of job offers and the closure of factories and offices in some areas have also dampened the economy watchers' sentiment on employment conditions, he said.

In August, the index for household spending in the current economic situation gained 0.9 point from July to 43.7, backed by robust sales of air conditioners, cold beverages and travel service, the official said.

But the index for corporate activity sank 4.3 points to 43.1 for the first slip in three months.

The index for employment shed 2.9 points to 48.3, falling below the 50 line for the first time since June 2003, when the index was 45.7, the official said.

The overall index for the direction of economic conditions in the coming few months edged down 0.2 point to 46.5 in August for the fourth straight month of decline, staying below the threshold line of 50 for the third straight month.

The figure was the lowest since 44.0 in December 2004 and reflected worsening sentiment on future employment conditions, the official said.

The index for the direction of household spending in the coming months edged up 0.1 point to 46.1, and that for corporate activity was unchanged at 46.3.

But the index for employment dipped 2.3 points to 49.7, falling below the 50 line for the first time since December 2004, when the index was at 49.6.

A worker with a general machinery maker in the Tohoku region of northeastern Japan said export conditions got worse with the sudden fluctuations in the foreign exchange rate.

A textile industry worker in the Kyushu region of southwestern Japan said business conditions have deteriorated as higher crude oil prices caused increases in the prices of fabrics and threads.

An editor of a job placement magazine in Hokkaido said the number of job offers has been smaller than year-before levels.

The Cabinet Office surveyed 2,050 workers across Japan from Aug. 25 to 31, of whom 88.2 percent responded.