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Wed, Jul 02, 2003 - Page 12 News List

Manufacturers in Japan feeling more confident

AP , TOKYO

Business sentiment among large Japanese manufacturers improved more than had been expected in a key survey by the nation's central bank released yesterday.

The Bank of Japan's "tankan" survey for the April-to-June period found that managers in the world's second-largest economy are turning more optimistic, with large companies planning to boost capital expenditure by an average of 4.9 percent this fiscal year.

Although Japan remains stuck in a long slowdown, worries about the war in Iraq as well as the SARS outbreak in the region have largely subsided. The Tokyo stock market, whose benchmark index earlier tumbled to 20-year lows, also has rebounded somewhat. Many companies, forced to cut jobs and reshape their strategies, are seeing profits slowly recover.

The quarterly survey showed that the business condition diffusion index for large manufacturers improved to minus five from minus 10 in the January-to-March quarter.

The index measures the percentage of companies saying business conditions are better minus the percentage saying things are worse. The index has been negative since March 2001.

Yesterday's figure means that pessimists still outnumber optimists. But the results were better than expected. Economists surveyed by Dow Jones Newswires had forecast on average that the index for large manufacturers would stand at minus 10.

The improvement also beat the companies' own expectations. Three months ago, they predicted the index would be minus eight.

But the government spokesman warned against too much optimism.

"The figure itself is not significant, to be honest," Chief Cabinet Secretary Yasuo Fukuda said. "We should remain watchful in running the economy."

Analysts say one critical factor that will determine Japan's prospects is the US economy. Domestic demand in Japan has stayed weak as people worry about their future and hold back spending.

Japan is suffering deflation, a continuing decline of prices, which has crimped profits and paychecks.

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