Japanese business sentiment ticks up

Story highlights

  • The mood among Japan's biggest companies has brightened three months after Shinzo Abe took office
  • The Bank of Japan's quarterly survey showed business confidence among large manufacturers rose

The mood among Japan's biggest companies has brightened three months after prime minister Shinzo Abe went all out to reflate the world's third-largest economy.

The Bank of Japan's quarterly Tankan report, released on Monday, showed that the key measure of business confidence among large manufacturers rose to minus 8 from minus 12 in December, as a weaker yen improves the outlook for profits.

Sentiment was better among large non-manufacturers too, with the headline "diffusion index" (DI) rising to 6, from 4 in December. The index is calculated by subtracting the percentage of firms saying business conditions are bad from those saying they are good.

The survey, carried out over the 30 days leading up to March 29th, showed that companies expect further improvements in business conditions following Mr Abe's aggressive push for monetary stimulus, with the headline indices for manufacturers and non-manufacturers forecast to rise to minus 1 and plus 9, respectively.

Overall, however, the survey showed that pessimism continues to prevail among Japanese executives. The DI for all 10,700 enterprises across all industries stood at minus 8, only slightly better than the level recorded in December. That index has not been in positive territory since a two-and-half-year run ended in December 2007.

Since then, Japan's economy has suffered stop-start growth and chronic mild deflation, with many companies struggling to rebound from the impact of the Lehman crisis and the March 2011 earthquake and tsunami.

The Tankan data are a key guide to the Bank of Japan as it formulates monetary policy. On April 3 and 4, the central bank holds its first policy board meeting under the leadership of governor Haruhiko Kuroda, who has vowed to do "whatever it takes" to hit a 2 per cent inflation target by 2015.

The Nikkei 225 stock average sank 0.7 per cent in the half-hour after opening on Monday, while the yen weakened slightly to about 94.25 to the dollar.