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Japanese business confidence hits 11-year high
TOKYO, Dec 15, 2017 (BSS/AFP) – Confidence among Japan’s biggest
manufacturers is at an 11-year high, a key central bank survey showed Friday,
as the world’s number-three economy picks up pace.
The bullish survey underscored how Japan’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 Bank of Japan’s Tankan report, a quarterly survey of more than 10,000
companies, showed a reading of 25 among major manufacturers in its December
survey, the highest since its December 2006 poll.
The mood among major manufacturers has now risen for a fifth straight
quarter.
The report, seen as the broadest indicator of Japan Inc’s health, marks
the difference between the percentage of firms that are upbeat and those that
see conditions as unfavourable.
Buoyed by a favourable outlook, the firms say they plan on average to
boost capital spending by 10.2 percent year-on-year, according to the survey.
“The strong reading reflects major manufacturers’ sound performance,
thanks to brisk demand in the global economy,” Tsuyoshi Ueno, economist at
NLI Research Institute, told AFP.
However, he also noted that firms “remain cautious about various risks
including geopolitical concerns over North Korea and the Middle East”.
The index for non-manufacturers came in at 23, unchanged from the previous
survey in October.
This was the highest level since the final quarter of 2015.
– ‘Growth to continue’ –
The report is a boost for Prime Minister Shinzo Abe, who swept to power in
late 2012 on a pledge to cement a lasting recovery in the once booming
economy with a growth plan dubbed Abenomics.
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The scheme — a mix of aggressive monetary easing and huge government
spending along with reforms to the economy — fattened corporate profits and
sent the stock market higher.
But it has failed in its goal of shrugging off the deflation that has
plagued Japan for years and held back growth.
Japan’s latest inflation rate of 0.8 percent is still nowhere near the
Bank of Japan’s 2.0-percent target, despite years of record monetary easing.
However, the economy expanded by 0.6 percent in the July-September period,
posting its longest string of gains in more than two decades.
“Even though the pace of improvement (in business confidence) is slowing
down, economic growth is likely to continue,” said Hideo Kumano, chief
economist at Dai-ichi Life Research Institute.
A major reason for the improvement this time is that the raw materials
industry has succeeded in raising prices thanks to brisk global demand, he
noted.
“But people in this sector don’t believe they can raise prices again soon,
so their sentiment for the future is not very good,” he added.
Among other positive factors are strong capital investment plans that are
“spreading to various sectors” including smaller manufacturers and non-
manufacturers, he said.
Looking further ahead, Japan will face a planned sales tax hike in 2019.
Abe has vowed to press on with the hike, even after the economy was pushed
into a brief recession following a 2014 tax rise.
But Kumano said it was too early for companies to pay close attention to
the impact of the planned move.
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