Fri, Jul 02, 2010 - Page 11 News List

Business confidence in Japan hits two-year high

BAROMETERThe ‘tankan’ large manufacturers’ index turned positive for the first time since 2008, showing the financial turmoil has not affected the real economy much

AP , TOKYO

Major Japanese manufacturers — riding high from a booming Asia — haven’t felt this good in two years.

A key central bank report released yesterday showed business confidence among Japan’s biggest manufacturers improved for a fifth straight quarter, thanks to Asia’s rapid rebound from the global recession, which has bolstered demand for the country’s exports of consumer gadgets, cars and other goods.

The Bank of Japan’s quarterly tankan survey of business sentiment showed the main index for large manufacturers stood at 1. Three months ago it hit minus-14.

The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable. The higher the number, the better the mood.

The result beat Kyodo news agency’s average market forecast of minus-3 and was the first reading in positive territory since June 2008.

The improvement in confidence suggests the recent turmoil in financial markets has not affected the real economy much, said Masamichi Adachi, senior economist at JPMorgan Securities Japan.

It has “reassured our view that recovery remains intact,” Adachi said in a commentary.

The latest tankan results lend support to the Bank of Japan’s assessment that the world’s ­second-biggest economy is enjoying a moderate recovery.

Big companies surveyed by the tankan indicated they planned to increase capital investments by 4.4 percent this fiscal year through March next year. The forecast is a significant reversal from last year’s 17 percent decline.

Japan’s most well-known brands have announced fatter capital spending plans for this fiscal year. Toshiba Corp is looking to spend US$14 billion over the next three years to amplify its strengths in semiconductors and nuclear power. Honda Motor Co expects a 50 percent jump in capital investments in the year through March next year after slashing such spending by 45 percent last year.

The good news, however, was tempered by other details that reflect emerging worries about Europe’s debt problems and ongoing caution about the sluggish domestic economy. Companies forecast marginal improvements in sentiment in coming quarters and employers report that they still have too many workers. Businesses of all sizes expect to slash hiring of new graduates by 24 percent this year, the tankan showed.

“Companies are pretty cautious given the European sovereign risk issues and appreciation of the yen and also the decline in equity markets,” Barclays Capital’s Japan economist Kyohei Morita said. “It’s really hard for companies to continue to improve their sentiment going forward.”

Data last week showed while Japanese export growth is still robust, it has slowed every month since February. Other government reports revealed moderating factory output and household spending, an unexpected rise in the country’s unemployment rate and more falling prices.

The mood among big non-­manufacturers climbed to minus-5 from minus-14 in December, according to the tankan.

Small and medium-size enterprises also reported higher numbers, though their business conditions continued to lag because large manufacturers have been the main beneficiaries of export growth. The confidence index for medium-size manufacturers rose to minus-6 from minus-19 three months ago. The small manufacturers’ index stood at minus-18 from minus-30.

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