TOKYO: Confidence at major Japanese manufacturers has plunged to the lowest it has been in over four years as the plummeting dollar, soaring fuel prices and fears of a US slowdown weighed on the economy.

The closely watched quarterly central bank “tankan” survey released yesterday, showed the index for large manufacturers’ business sentiment fell to 11 – down from 19 – in the survey released in December.

The latest reading was the lowest since December 2003, and even lower than 12 – the figure expected by analysts polled by Dow Jones newswires.

The tankan sentiment index is the percentage of companies saying business conditions are good minus those saying conditions are unfavorable.

“The tankan is showing that conditions are extremely bad for Japanese companies,” said Yuji Shimanaka, chief economist Mitsubishi UFJ Securities in Tokyo.

Fears have been looming about the health of the world’s second largest economy as Japan remains so dependent on exports for growth that a weak dollar is likely to further dent already poor profits at some companies.

The dollar fell below 96 yen in March for the first time in more than 12 years.

Share prices have also been battered, with the major index on the Tokyo Stock Exchange – Asia’s biggest bourse – losing nearly a third of its value over the last fiscal year.

Shimanaka urged the Bank of Japan to immediately start lowering interest rates to salvage the economy. The central bank has kept its benchmark interest rate at a low 0.5 per cent since February last year.

“A series of shocks has hurt the economy,” Shimanaka said, listing the global slowdown, a weak dollar and soaring oil prices.

Rising fuel prices have been especially hard on smaller companies, he said.

The index for small manufacturers stood at minus 6 in March, while the small non-manufacturers’ index hit minus 15.

Sentiment among large non-manufacturers deteriorated to 12 from 16 three months ago.

The Bank of Japan surveyed 10,705 companies between 26 February and 31 March, of which 98.6 per cent responded.

Adding to the gloom was the showing on prospects for the future from the “tankan,” which found that Japanese companies plan to slash capital expenditures this fiscal year.

The tankan survey showed large Japanese companies plan to decrease business investment by 1.6 per cent this fiscal year, which began yesterday.