The confidence of Japan's large manufacturers declined in the fourth quarter as a recession offset a boost from a weaker yen, underlining the challenges facing Prime Minister Shinzo Abe after his re-election.
The Tankan's big manufacturer index slipped to 12 in December from 13 in September, the Bank of Japan said. The index is forecast to drop to 9 in March.
A recession and an election victory that puts pressure on Abe to deliver on growth-boosting reforms are raising the stakes for his efforts to revive the world's third-biggest economy. Burdened by debt, the Government is counting on companies to increase investment and wages to fuel a recovery.
"Companies are still cautious," said Kiichi Murashima, an economist at Citigroup. "I doubt capital investment will be implemented as planned as companies are still not expecting strong growth in the economy."
Sentiment among large non-manufacturers rose to 16 from 13. Across all industries, big companies plan to boost capital expenditure 8.9 per cent this fiscal year through March, compared with plans for an 8.6 per cent lift in the September survey.
