More than 70 percent of 105 leading Japanese companies see economic activity here either receding or flattening out because of the yen's continued strength and slowdowns in the U.S. and European economies, according to survey released Monday.
Japan's economy is regarded as "slowing" or "gradually slowing" by 17 companies, and leveling out by 58, the December survey carried out by Kyodo News said.
The survey sought responses from the top executives at leading companies including Canon Inc., Nippon Steel Corp., Sony Corp., Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc.
Asked to assess the hike in the consumption tax planned by the government of Prime Minister Yoshihiko Noda for comprehensive social security and taxation reform, 70 companies said they accept it, although many said the increase should follow a pickup in economic activity and thorough cuts in expenditures. Two firms opposed the plan, which would double the 5 percent rate to 10 percent in two stages.
Asked about worrisome factors the economy faces, 64 firms referred to the deepening European financial crisis, followed by 61 respondents who expressed concern about the rising value of the yen.
In contrast, 59 companies said they pin high hopes on earnest growth in demand for reconstruction work in the aftermath of the March 11 earthquake and tsunami.
The survey also found that 49 companies said they expect economic activity to improve six months down the road, compared with 43 firms forecasting it will remain unchanged.
With the dollar staying below ¥80, 54 companies said the strong yen has eaten into their earnings, while 41 said they have either been little affected or seen somewhat improved earnings.
Among other findings, nearly 60 percent of the respondents called for the government to step into the currency market to stem the yen's appreciation.