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Confidence among Japan’s small and mid-sized companies fell to a record low after factory output tumbled on weakening global demand.

Shoko Chukin Bank’s index of sentiment slid to 29.4 points this month, the lowest since the survey began in February 1985, according to the monthly report of 1,000 companies by the bank. A number below 50 means pessimists outnumber optimists.

Companies cut production at the fastest pace in 55 years in November as exports plunged the most on record, a government report showed today. Economists say exporters’ woes are likely to filter to the small and midsized businesses that employ about 70 percent of Japan’s workforce.

“Large companies’ hardships will become more widespread,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “That will deepen Japan’s recession through cuts in jobs and wages as most employees work for smaller companies payday loans.”

Measures for confidence about borrowing and profits both fell to a record low, said Daisuke Yoshitomi, a researcher at Shoko Chukin.

“Small companies are having a tough time with sales declining and lending standards tightening,” Yoshitomi said. “There’s fear because no on can foresee when the recession will bottom.”

Small business executives said sentiment will deteriorate further, expecting it to fall to 27.8 next month, the report showed. Sentiment for lending dropped to minus 15.7 and profits declined to minus 27.3 in December.

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