A mood of pessimism has come over Japan as Asia’s biggest economy confronts the prospect of a global slump.

The Bank of Japan’s September Tankan survey of business confidence, the most scrutinised quarterly indicator of the country’s corporate health, fell into negative territory for the first time in five years. A senior fund manager with BlackRock said that the survey, published yesterday, was the final nail in the coffin of the theory that Asia might imminently “decouple” from the rest of the world economy.

Pessimism by Japan’s big manufacturers, many of which make machinery used by manufacturers across Asia, suggests that industrial production in the region may already be severely dented by the US turmoil.

Fear of pay freezes in a slack labour market appeared to have driven Japanese consumers into despair not seen for 11 years. The BoJ’s quarterly study of the mood on the streets showed that people are more pessimistic about Japan’s economy than they have been since March 1996 – in the depths of the country’s stagnant “lost decade”.

The drop in the Tankan “diffusion index” of bullish business outlooks minus bearish ones was especially significant among big manufacturers; it is now at minus three, after plus five at the end of the previous quarter.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive