Japanese Business Confidence Returns to Pre-crisis Level

Japanese business confidence strengthened over the three months to December, recording a fourth consecutive quarterly increase and a return to the highest level since 2007 before the global financial crisis, according to the Bank of Japan’s (BoJ) latest Tankan survey.

The survey recorded improving sentiment not only for major corporates but also among smaller companies, which had been slower to reap the benefits of a recovering economy. The results suggest that prime minister Shinzo Abe’s so-called Abenomics stimulus policies are gaining broader traction across the economy

Small manufacturers’ sentiment hit a six-year high and the small non-manufacturers’ index turned positive for the first time since 1992 as the number of optimists outnumbered pessimists.

The Tankan survey reinforces the BoJ’s view that Japan’s economy is recovering moderately and will probably allow it to hold off on expanding stimulus in coming months, according to analysts. “The economy is moving in line with the BoJ’s forecasts, which means the central bank will keep monetary policy steady at least next week and in January,” said Junko Nishioka, chief Japan economist at RBS Securities.

A poll conducted earlier this month by Reuters found that almost two in three Japanese firms expect the BoJ to increase its stimulus in the first half of 2014. There are factors that cloud the outlook, such as weakness in emerging economies that have capped export growth. Major manufacturers and non-manufacturers both expect business conditions to worsen slightly in the three months to March, the Tankan showed, highlighting their uncertainty on whether the economy will sustain its momentum.

 

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