Business confidence soars: Japan bank

BUOYANT::Businesses big and small think conditions have been the best in six years, but investors are playing it safe ahead of the anticipated US bond-buying tapering


Tue, Dec 17, 2013 - Page 15

Japanese business confidence has soared to a six-year high, the country’s central bank said yesterday, underscoring growing optimism among major companies, despite a slowdown in the world’s third-largest economy.

The Bank of Japan’s quarterly tankan survey, which polled more than 10,500 firms, surged to its strongest level since December 2007, with a reading for large manufacturers rising to plus-16 from plus-12 in September.

The non-manufacturers’ index also jumped to plus 20 from plus 14, the best reading in more than six years. The numbers represent the percentage of respondents saying conditions are good, minus those who say they are poor.

Some analysts expect bank policymakers will unleash further easing measures to boost the slowing economy, highlighting the challenges Japanese Prime Minister Shinzo Abe faces in his bid to stoke growth with government spending and monetary policy, a blitz dubbed Abenomics.

“It’s not only the large, export-oriented companies that are benefiting from Abenomics,” Capital Economics said, referring to the bank’s survey results.

“For the first time since the early 1990s, the number of small companies that regard business conditions as favorable exceeds the number of companies that consider them unfavorable,” the analysts said.

However, the survey also showed that big firms are cutting back on their capital spending plans for the fiscal year to March. Corporate investment is a cornerstone of Abe’s plan to reverse years of deflation, which has weighed on consumer spending and, in turn, producers.

The bank’s survey did little to boost investor sentiment, with Tokyo’s benchmark Nikkei 225 index closing down 1.62 percent.

Analysts say investors are cautious ahead of the US Federal Reserve’s two-day policy meeting starting today as speculation grows that it will start reeling in its US$85 billion-a-month bond buying plan, known as quantitative easing (QE).

The bank’s own two-day meeting starts on Thursday, with all eyes on any fresh moves from policymakers after the bank unleashed a huge monetary easing plan in April.

Tokyo has approved a spending package worth almost US$54 billion to offset the tax increase — to 8 percent from 5 percent — seen as crucial for bringing down Japan’s huge national debt, proportionately the worst among rich nations.

Analysts have warned that Abe’s bold pro-growth program is not enough on its own without promised economic reforms.

A proposed shake-up, including loosening labor laws and signing free-trade deals, is seen as key to ushering in lasting change in the long-slumbering economy.