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Tankan shows confidence rising
By CNN's Geoff Hiscock, Asia Business Editor
(CNN) -- A key survey of business sentiment in Japan shows confidence among big manufacturers is at its highest level in almost three years. The Bank of Japan's closely watched tankan survey, released Wednesday, found sentiment for large manufacturers was plus 1 in September, up from minus 5 in June. That was slightly better than analysts' expectations of a zero reading and the best since December 2000. The survey result adds to recent data showing the world's second-largest economy is on the improve. On Tuesday the government said Japan's jobless rate fell to 5.1 percent in August, down from 5.3 percent in July. Spending by wage earners in August also rose 2.2 percent from a year earlier. Although other data out on Tuesday showed industrial production fell 0.5 percent month on month in August, analysts said Japan's fundamentals still look good and the figures were likely skewed by August holiday "noise". ING's Tokyo-based chief economist Richard Jerram said in a research note that in addition to an export recovery, the domestic economy's fundamentals are improving, as illustrated by the labor market data. Barclays Capital Japan economist Mamoru Yamazaki told CNN on Wednesday that the tankan result confirmed the recovery is underway, with big makers leading the way. But he said appreciation of the yen was a factor to be watched. Manufacturers are expecting a dollar/yen rate of about 118 in 2003-04, so a continuation at its current level would have a negative impact on corporate profits, Yamazaki said. The latest survey was taken before the recent strengthening of the yen against the dollar began. The dollar is trading at 111.11 yen Wednesday after intervention by Japanese authorities on Tuesday to keep the yen from firming too much. The United States is a key market for big Japanese exporters such as makers of cars and consumer electronics. In mid-August, Japan released figures showing surprisingly strong economic growth for the June quarter of 0.6 percent over the previous quarter. That equated to growth on an annualized basis of 2.3 percent. Wednesday's tankan survey result builds on this pattern of improvement, with large manufacturers seeing the sentiment index at plus 3 in December. That is ahead of their own expectations of minus 5 in the previous survey and in line with a median forecast by economists of plus 3. The index measures business sentiment by comparing the percentage of companies reporting unfavorable conditions from those that say they are favorable. The tankan surveys more than 8000 large, medium and small enterprises on their views of the economy, including their spending and hiring plans. Sentiment among large non-manufacturers was minus 13 in September, the same as June's figure but slightly worse than a forecast of minus 11. The reaction to the tankan result is mixed on equity markets, with the Nikkei up about 0.2 percent at midday Wednesday. Toyota is up 0.6 percent, but Honda and Nissan are both down, as is consumer electronics leader Sony.
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