A key central bank survey offered a cautiously optimistic assessment of corporate Japan, where business confidence is improving even as the global economy’s prospects darken.
In the Bank of Japan’s quarterly tankan survey of business sentiment released yesterday, the main index for big manufacturers climbed back into positive territory as a recovery from the March 11 earthquake and tsunami took hold. The latest reading stood at 2, up from minus 9 three months ago.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable, with 100 representing the best mood and minus 100 the worst.
The numbers “clearly support our view that Japan’s economy continues to recover, largely due to the improvement of auto sector, even with intensified headwinds from slower global growth and yen appreciation,” Masamichi Adachi, senior economist at JPMorgan Securities Japan, said in a research note.
The mood among big non-manufacturers also climbed into positive territory to 1 from minus 5 in June.
Smaller enterprises improved as well, though they were not feeling quite as optimistic. The confidence index for medium-sized manufacturers rose to minus 3 from minus 12. The small manufacturers’ index stood at minus 11 from minus 21.
The future appears less certain. Companies in the tankan gave a mixed picture of the months ahead, reflecting deepening worries about global growth, Europe’s debt problems and a persistently strong yen.
The survey forecasts business sentiment among large manufacturers to rise to 4 over the next quarter. Medium-sized manufacturers also expect a slight improvement. However, small manufacturers and non-manufacturers predict business conditions to either stay flat or deteriorate.
The tankan, which helps guide monetary policy, showed that large companies overall plan to boost capital spending by 3 percent this fiscal year ending March. The figure is down from 4.2 percent in the June survey.
Large manufacturing firms assume an average exchange rate of ￥81.15 per US dollar for this fiscal year compared with current rate of about ￥77. The discrepancy could mean firms will have to revise down revenue and profits forecasts later in the year.
The Bank of Japan surveyed 10,910 firms nationwide. About 99 percent responded. The bank’s next policy board meeting is scheduled for Thursday and Friday.
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