July 1 (Bloomberg) — Natural rubber futures dropped after a Bank of Japan survey showed business confidence rebounded less than expected, raising concern that a slow recovery may curb demand for the raw material used in vehicle tires.

Futures in Tokyo lost as much as 2.7 percent after rising yesterday to the highest in almost two weeks. An index of confidence among large Japanese makers of electronics, cars and other products climbed to minus 48 in June from a record minus 58 in March, the Tankan survey showed today. Economists surveyed by Bloomberg News had predicted minus 43.

“Futures were sold as the data showed the reality of the economy was not as good as investors had expected,” Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said today in a telephone interview.

Rubber for December delivery, the most-active contract, settled down 2.2 percent at 158.7 yen a kilogram ($1,638 a metric ton) on the Tokyo Commodity Exchange after falling as much as 4.3 yen to 157.9 yen. It was the second drop this week.

Big companies surveyed by the Japanese central bank plan to cut spending at a faster rate than they predicted three months ago as profits fall and factories lie idle.

“This Tankan makes me very skeptical about the sustainability of the recovery,” said Takahide Kiuchi, chief economist at Nomura Securities Co. The “economy may start to deteriorate after the third quarter.”

Sales in Japan of cars, trucks and buses, excluding minicars, fell 14 percent to 243,342 vehicles in June, the Japan Automobile Dealers Association said in a statement today.

The pace of decline in auto sales slowed last month from 29 percent in April and 19 percent in May, as government subsidies and tax cuts helped boost sales of Toyota Motor Corp.’s new Prius and Honda Motor Co.’s Insight gasoline-electric hybrid cars.

Rubber for November delivery on the Shanghai Futures Exchange, the most-active contract, lost 1 percent to 15,440 yuan ($2,259) a ton.

Source: Bloomberg

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