Business sentiment among major Japanese manufacturers turned positive for the first time in nearly two years, a signal that companies are reacting positively to the weaker yen and Japanese Prime Minister Shinzo Abe’s policies to revive the stagnant economy.
The Bank of Japan’s closely watched quarterly tankan survey for last month showed that the index for major manufacturers rose to positive 4 from negative 8 in March.
The survey released yesterday was the first to show a reading higher than zero since September 2011. A positive reading means that more companies are optimistic than pessimistic.
The index for major non-manufacturers rose to 12 from the reading of 6 in the last survey.
The tankan also showed that Japan’s major manufacturers plan to increase capital spending by 6.7 percent in the current fiscal year, while non-manufacturers plan to increase investment by 4.9 percent.
The improved confidence comes amid a weakening yen, which boosts overseas income for Japan’s key exporters, and a series of aggressive economic policies — monetary easing and boosting public spending — implemented by Abe since he took office in December last year.
Japan on Friday said that industrial production had risen 2 percent in May from April, the fourth monthly increase, while core consumer prices had stopped falling for the first time in seven months.
For years, Japan has been dogged by deflation, or falling prices, which can drag on economic growth, and the Bank of Japan has set a goal of achieving 2 percent inflation within the next two years.
Japan’s economy grew at a 4.1 percent annual pace in the first quarter.
The stock market has risen sharply this year, but share prices have fallen back over the past month amid skepticism about Abe’s plans to enact structural reforms in the economy and a belief that prices rose too far too fast.