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Japanese business confidence to rise as exports increase

Business confidence among Japanese companies, especially among large manufacturers, is expected to have risen in the January-March quarter, thanks to solid exports and cost cutting measures at firms, economists say.

Non-manufacturing firms are, however, expected to have continued to feel the pinch of deflation in the Tankan business survey by the Bank of Japan to be released Tuesday.

"The real economy is not so bad, thanks especially to solid exports to Asian nations, which are generally enjoying robust growth," said Hideki Matsumura, economist at Japan Research Institute.

"The domestic economy is still weak. But industrial output is not weakening. Machinery orders are also solid. It is believed that corporate confidence has gradually improved in the March quarter, especially among large manufacturing companies."

Other economists, echoed that view in giving their predictions for the outcome of the latest Tankan.

"At least manufacturers are benefitting from a rise in export sales. At the same time, they're cutting down on costs, so that would lead to an improvement in profit margins," said JP Morgan economist, Ryo Hino.

There were "no signs of improvement in the sector" for non-manufacturers -- including the construction, service and retail sectors -- said Teruo Ikeda, economist at UFJ Institute.

Deflation was squeezing profits of non-manufacturing companies, and consumer buying sentiment is fading.
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