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TOKYO, Dec 24 (Reuters) - Big Japanese firms grew more pessimistic about business conditions in the three months to December, hit by tighter funding conditions and plummeting exports amid the global economic slump.
The widespread gloom comes as companies like Toyota Motor warn of unprecedented tough times and small firms fear banks may not lend them desperately needed funds.
Prime Minister Taro Aso's cabinet approved a record 88.5 trillion yen ($980.6 billion) budget for the year starting in April, which would finance part of 12 trillion yen in spending on economic stimulus packages.
But amid slumping public support for his administration, doubts are growing over whether he has has the political muscle to push the budget and other related bills through a divided parliament.
"The data confirmed the deterioration in economic sentiment. Companies also revised down their outlook for January-March," said Azusa Kato, an economist at BNP Paribas.
"This could lead to a big downward revision in companies' capex plans. They may not just postpone investments but also reduce midterm spending plans," she said.
The global turmoil has already pushed much of the world's economy into recession, prompting policymakers to dish out trillions of dollars in bailouts and fiscal stimulus packages and drive borrowing costs aggressively ever closer to zero.
Financial markets, in holiday-thinned trade, did not show any reaction to the data.
The MOF's survey of about 11,400 firms, based on business conditions as of Nov. 25, showed the business survey index (BSI) of sentiment at large companies dropping to minus 35.7, the lowest in the survey's five-year history, from minus 10.2 three months before.
The index for manufacturers, which are bearing the brunt of the global downturn, dropped to minus 44.5, from minus 10.0 in July-September.
The poll underlined the rapid deterioration in the Japanese economy, which has prompted the Bank of Japan to lower rates twice in two months and many Japanese companies to cut their earning outlooks.
The BOJ last week cut its benchmark policy rate to 0.10 percent and adopted additional measures such as temporary outright buying of commercial paper to deal with the corporate credit crunch.
The decision came after the bank's closely watched tankan survey showed Japanese business sentiment suffering its sharpest fall since the 1970s.
Exports, the main engine of Japanese growth, tumbled in November as global demand dived, after the near collapse of the U.S. financial system in September sent shock waves throughout the world.
The yen also soared to 13-year highs against the dollar this month, cutting into Japanese exporters' profits earned overseas as well as hurting their competitiveness.
Consumer sentiment is also worsening as several companies cut jobs to deal with a sharp fall in demand, overshadowing the benefits of cheaper oil and other imported goods due to a stronger yen. (Reporting by Hideyuki Sano; Editing by Chris Gallagher)