Big firms' sentiment improves in Japan for 6th straight quarter: survey

10:43, September 29, 2010      

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Sentiment among Japan's big manufacturers improved for the sixth successive quarter at a faster pace than expected, the Bank of Japan said in a quarterly report on Wednesday.

The central bank's closely watched tankan survey revealed that whilst companies are somewhat circumspect about their future due to the strength of the yen and global economic instability, a recovery in exports is gradually lifting corporate spending and aiding the nation's sluggish export-led recovery.

The headline diffusion index (DI) for big manufacturers' sentiment rose to 8 in September, up for a sixth straight quarter and marking the best reading since March 2008, the survey showed on Wednesday.

The DI in the recording period beat median market expectations of 6. The reading in the previous survey in June stood at just 1.

The figure is derived from the percentage of companies saying business conditions are good minus those saying conditions are bad.

Regarding sentiment among large non-manufacturers, the bank said confidence improved to 2 in September from a reading of minus 5 in June -- far better than economists' forecast of minus 2.

The Bank of Japan's survey also showed that big firms in Japan plan to raise their capital spending by 2.4 percent in the financial year to March 2011, less than the market's median forecast for a 4.2 percent rise.

The bank also said however that companies expect conditions to worsen sharply over the coming quarter.

The business sentiment index for large manufacturers is expected to slump to minus 1 in the next survey to be released in December, while the index for large non-manufacturers is expected to read minus 2.

"Companies are becoming more anxious about the business outlook because of concern over slower global growth and the yen's gain," said Minoru Nogimori, an economist at Nomura Securities Co. in Tokyo.

"If the Tankan shows weakness, it may build up pressure on the central bank to do what needs to be done."

BOJ Governor Masaaki Shirakawa reiterated recently that the central bank is ready to take policy action if necessary. He said the bank stands ready to intervene in currency markets again, if deemed necessary.

Tokyo intervened in the currency market on Sept. 15 by selling yen for the first time in more than six years, with the yen's surge to a 15-year high versus the dollar seen as threatening to seriously hamper Japan's export-led economic recovery and foster the nation's lingering deflation.

The biggest yen decline since Sept. 15 was recorded on Friday, when the yen dropped 1 percent in about 10 minutes reaching a low of 85.40 per dollar.

The central bank's survey showed big manufacturers expect the dollar/yen rate to average at 89.44 yen in the October-March second half of this financial year and 89.66 yen for the full the year.

Japan's central bank has pledged to pursue powerful monetary easing, ensuring financial market stability and supporting efforts to strengthen the foundations for economic growth.

The BOJ's next two-day policy board meeting is scheduled for Oct. 4, at which analysts predict a further expansion of its low interest rate lending facility, which last month was expanded from 10 trillion yen (118.75 billion yen) to 30 trillion yen, will be discussed as a viable option for further monetary easing.

The 146th Short-term Economic Survey of Enterprises in Japan released today covers thousands of Japanese companies with a specified minimum amount of capital, although firms deemed sufficiently influential may also be included. The companies are asked about current trends and conditions in the business place and their respective industries as well as their expected business activities for the next quarter and year.

Source: Xinhua


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