With the advent of Japan’s Tankan report, the US-UK Japan point of view will line up on the side of more stimulus. It is not clear that they have enough support to carry the day, however. Germany is still opposed to more stimulus now and that position has been stated again today. Both France and Germany want progress on regulation. Each has said it wants real progress and agreement on a series of key principles. So it’s not clear how these very different priorities will play out at the summit. Where the US president says unity is the most important theme, claiming that differences among G-20 members have been exaggerated by the press. Wow, no wonder so many newspapers are failing.

Japan’s Tankan is a worst-ever reading for large corporate participants in the survey. Each of the survey categories across various industries points to full period lows. Personal services at large enterprises are an exception but not much of one.

The MFG reading fell to -58 in Q1-2009 from -24 in Q4-2008. Non MFG fell to -31 in Q1 from -9 in 2008-Q4.

The MFG outlook index for large firms has dropped to -51 in 2009-Q1 from -36 in 2008-Q4. For non MFG firms the drop in the outlook is to -30 in Q1 from -14 in 2008-Q4. These are deeply negative numbers and represent sharp deteriorations from already weak readings in Q4.

Medium and small companies have a similar unraveling in progress.

Japan has seen its domestic auto production fall sharply as its exports have been hammered. The exports are lower by over 50% Yr/Yr. Export markets have generally dried up as recession forces hit hard on the cusp of the third to fourth quarter last year. Japan is caught as its main exports are to the US, a very weak economy, and to China where some growth remains in train but where its exports, too are being clobbered. As of January US imports from Japan are down by 30% Yr/Yr. Japan is burdened by a large outstanding balance of public debt and as a rising yen value has crimped its competitiveness in a fading market.