Ja­pan busi­ness con­fi­dence hits three-year high: BoJ

Kuwait Times - - BUSINESS -

TOKYO: Con­fi­dence among Ja­pan’s big­gest man­u­fac­tur­ers has risen for the third straight quar­ter to the best level in more than three years, a key cen­tral bank sur­vey showed yes­ter­day as ex­ports con­tinue to grow. The Bank of Ja­pan’s Tankan re­port-a quar­terly sur­vey of more than 10,000 com­pa­nies-showed a read­ing of 17 among ma­jor man­u­fac­tur­ers, the high­est since the first quar­ter of 2014.

The key in­dex, which rose from 12 in the pre­vi­ous sur­vey, also beat mar­ket ex­pec­ta­tions of a re­sult around 15. The bet­ter-than-ex­pected Tankan would nor­mally be good news for Prime Min­is­ter Shinzo Abe, who has been try­ing to re­vi­talise Ja­pan’s econ­omy. But the re­sults came a day af­ter his Lib­eral Demo­cratic Party suf­fered a crush­ing de­feat in elec­tions for the Tokyo mu­nic­i­pal assem­bly.

The vote was seen as a barom­e­ter of cur­rent pub­lic sen­ti­ment to­ward his gov­ern­ment which has been be­set by a series of scan­dals that have dented its sup­port. Abe swept to power in late 2012 on a pledge to ce­ment a last­ing re­cov­ery in the world’s third-largest econ­omy with a growth plan epony­mously dubbed Abe­nomics. The scheme-a mix of ag­gres­sive mon­e­tary eas­ing and huge gov­ern­ment spend­ing along with re­forms to the econ­omy-stoked a stock mar­ket rally as it weak­ened the yen and fat­tened cor­po­rate prof­its, but the ef­fect on the wider econ­omy has been less dra­matic.

Re­cently the coun­try’s prospects have been im­prov­ing on the back of strong ex­ports, with in­vest­ments linked to the Tokyo 2020 Olympics also giv­ing the econ­omy a shot in the arm. “The jump in the Tankan’s head­line in­dex for large man­u­fac­tur­ers sug­gests that eco­nomic ac­tiv­ity ac­cel­er­ated last quar­ter,” said Mar­cel Thieliant, se­nior Ja­pan econ­o­mist at Cap­i­tal Eco­nom­ics. “Ca­pac­ity short­ages have in­ten­si­fied and man­u­fac­tur­ers are re­port­ing the small­est de­clines in out­put prices since 2008,” he wrote in a com­men­tary.

The lat­est sur­vey also showed the av­er­age cur­rency ex­change rate ex­pected by large man­u­fac­tur­ers came in at 108.31 yen to the dol­lar for the year to March 2018, much stronger than cur­rent mar­ket rates. As the ac­tual rate is cur­rently around 112 yen, “there ap­pears to be room for sen­ti­ment to im­prove fur­ther, es­pe­cially in man­u­fac­tur­ing, in the Septem­ber sur­vey,” econ­o­mists Yuichiro Na­gai and Yuk­ito Fu­nakubo of Barclays said in a re­search note. A weaker cur­rency is pos­i­tive for Ja­panese ex­porters as it makes their prod­ucts more com­pet­i­tive abroad and in­flates repa­tri­ated prof­its.

The Tankan, closely watched for be­ing the broad­est in­di­ca­tor of how Ja­pan Inc is far­ing, marks the dif­fer­ence be­tween the per­cent­age of firms that are up­beat and those that see con­di­tions as un­favourable.

The lat­est re­port comes af­ter a batch of gov­ern­ment data on Fri­day showed in­fla­tion ticked up in May, but weak spend­ing un­der­lined the chal­lenges still fac­ing Tokyo’s bat­tle to ramp up prices and slay years of on-off de­fla­tion. The in­dex for non-man­u­fac­tur­ers rose to 23 from 20 in the pre­vi­ous Tankan, reach­ing the high­est level since the fi­nal quar­ter of 2015.—AFP

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