Japan Business Sentiment Hits Highest Point in Two Years

TOKYO — Business sentiment among major manufacturers in Japan is at its highest in more than two years, a closely watched central bank survey showed Monday, in a sign that the economic policies of Prime Minister Shinzo Abe are continuing to lift Japan’s corporate outlook.

The Bank of Japan’s “tankan” survey for the three months through June showed that the headline index for major manufacturers rose to 4 from negative 8 in the previous quarter, the second consecutive quarter of improvement.

The index beat market expectations that it would rise to 3; the reading Monday was the highest since March 2011, and the first positive reading since September that year. It compares with a dismal result of negative 48 four years ago, in the depths of the global economic crisis.

The Nikkei average climbed 1.3 percent to a one-month high after the upbeat tankan, finishing the day at 13,852.50, its third straight session of gains.

The corporate improvement comes six months into Mr. Abe’s bid to jump-start Japan’s economy with a combination of aggressive monetary easing, government stimulus and a package of promised economic changes.

An immediate effect of his policies has been a weaker yen, which has come as a boon to Japan’s exporters by inflating the value of their overseas earnings. Earnings at Toyota and Japan’s other big manufacturers have already gotten a big boost from the tumbling currency.

The tankan also showed improved sentiment in the service sector, with the index for big non-manufacturing companies rising 6 points to 12.

The survey “showed a broad-based improvement of corporate sentiment from March to June, as widely expected,” Masamichi Adachi, a Tokyo-based economist at JPMorgan Securities Japan, said in a note.

The reading fell short of Mr. Adachi’s forecast of 9, however, thanks in part to cautiousness on the part of many manufacturers in assuming that the yen will remain weak in the longer run.

Kyohei Morita, Japan economist for Barclays, wrote in a note that improved business sentiment was in line with expectations and set the stage for strong economic growth for Japan.

“We look for Japan to outpace its G7 peers” in economic growth, he said, referring to the conference of seven industrialized nations. Last month, government figures showed that Japan’s gross domestic product grew at a robust annualized pace of 4.1 percent in the first quarter, by far the fastest clip among the Group of 7.

Economists are now watching to see whether the positive turn in mood at Japan’s big companies will trickle down to Japan’s consumers. On that front, the evidence is mixed.

The tankan measures sentiment by conducting a survey of Japan’s largest companies and subtracting the percentage of respondents who say conditions are negative from those who say they are positive.

Article source: http://www.nytimes.com/2013/07/02/business/global/japan-business-sentiment-hits-highest-point-in-two-years.html?partner=rss&emc=rss