Japan’s business confidence climbs to 10-year high

14:03 | 03/10/2017 Global Economy

Confidence among Japan’s biggest manufacturers has jumped to its highest level in a decade, a key central bank survey showed Monday, as the world’s third-largest economy picks up pace.

japans business confidence climbs to 10 year high
People walk in front of a shoe store in Tokyo - Photo: AFP/JiJi

The report comes after a batch of broadly positive economic data on Friday, including better-than-expected factory output, that offered up some good news for Prime Minister Shinzo Abe as he faces a national election on Oct. 22.

The Bank of Japan’s tankan — a closely watched quarterly survey of more than 10,000 companies — showed a reading of 22 among major manufacturers in its latest report, the highest since its September 2007 reading, when the headline figure sat at 23.

The latest survey handily beat market expectations for a reading of 18.

The report is 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 unfavorable.

The mood among major manufacturers, which plan to boost their capital spending, has now risen for a fourth straight quarter.

The index for nonmanufacturers came in at 23, unchanged from the previous tankan, and sitting at its highest level since the final quarter of 2015.

The upbeat survey underscores how the nation’s economic 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 continued improvement in business conditions in today’s tankan points to robust economic growth,” research house Capital Economics said in a commentary after the report was published.

Abe swept to power in late 2012 on a pledge to cement a lasting recovery with his economics agenda, commonly called Abenomics.

The policies — a mix of aggressive monetary easing, massive government spending and comprehensive economic reforms — fattened corporate profits and sent the stock market higher. But it has failed in the goal of shrugging off the deflation that has plagued the nation for years and held back growth.

Japan’s latest inflation rate of 0.7 percent was still nowhere near the BOJ’s 2 percent target, despite years of record monetary easing.

However, the economy expanded in the April-June period, capping off six straight quarters of gains in its longest winning streak in over a decade.

Abe’s record on the economy will be among the issues that voters are sure to consider in the vote this month.

“It is difficult to say how much continued monetary easing has been contributing to this economic improvement,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “It’s thanks to a recovering overseas economy while domestic demand has also rebounded. Given that the election is coming, the ruling coalition will stress the achievements of Abenomics.”

Another key issue in the coming election is a planned sales tax hike in 2019.

Abe has said he would press on with the levy rise, even after the economy was pushed into a brief recession following a 2014 tax hike.

Theo Japantimes