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Japan Tankan Signals Business Spending Cuts May Impede Recovery
The Bank of Japan's quarterly Tankan report reflected businesses plans to further reduce spending, since it is estimated that profits will fall 20 percent this year, which is almost twice the March forecast.
Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo said, "Companies have started to realize that sales aren't really going to come back, companies are faced with massive excesses in capacity." Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo said, "It could be two or three years before companies are using even three quarters of their production capacity." Aware of this, managers are cutting investment, jobs and wages. Toyota, for instance, is cutting spending 36 percent and is simultaneously cutting wages for factory workers by 15 percent. As profits continue falling, companies will continue to hire less workers (and lay some off) and invest less.read source article