Business confidence among major Japanese manufacturers has plunged to a seven-year low, a central bank survey shows.

The Bank of Japan's tankan corporate survey of more than 10,000 firms, released on Monday, has shown that confidence decreased to minus 24 in December from minus three in the previous quarter, hitting the lowest level since early 2002.

Manufacturers painted a grim outlook of business prospects, forecasting a further slump in confidence to minus 36 in March.

The index measures the percentage of firms that think business conditions are good minus those that think they are bad.

Further downturn

The survey also showed that major Japanese manufacturers expect a 24.2 per cent slump in pre-tax profits in the current financial year to March.

Business confidence among the manufacturers is also said to have fallen at the fastest pace in more than three decades.

Business sentiment has been worsening as the global financial crisis pushes Japan's economy into its first recession in seven years, heightening views that it will suffer its longest contraction on record.

With exports suffering from the global slowdown, corporate profits are being eroded prompting many Japanese companies to slash investment in new equipment and factories, which had been a key driver of economic growth.