TOKYO: Japanese business confidence has soared to a six-year high, the country’s central bank said on Monday, underscoring growing optimism among major companies despite a slowdown in the world’s third-largest economy.
The Bank of Japan’s (BoJ) quarterly Tankan survey, which polled more than 10,500 firms, surged to its strongest level since December 2007, with a reading for large manufacturers rising to plus 16 from plus 12 in September.
The nonmanufacturers’ index also jumped to plus 20 from plus 14, the best reading in more than six years. The numbers represent the percentage of respondents saying conditions are good minus those who say they are poor.
Some analysts expect BoJ policymakers will unleash further easing measures to boost the slowing economy, highlighting the challenges Prime Minister Shinzo Abe faces in his bid to stoke growth with government spending and monetary policy, a blitz dubbed as “Abenomics.”
“It’s not only the large, export-oriented companies that are benefiting from Abenomics,” Capital Economics said, referring to the BoJ survey results.
“For the first time since the early 1990s, the number of small companies that regard business conditions as favorable exceeds the number of companies that consider them unfavorable,” it added.
However, the survey also showed that big firms are cutting back on their capital spending plans for the fiscal year to March. Corporate investment is a cornerstone of Abe’s plan to reverse years of deflation, which has weighed on consumer spending and, in turn, producers.
The country’s once-anemic economy had been outpacing other Group of Seven nations in the first half of the year, as Tokyo’s growth drive helped push down the yen, boosting exporters and sparking a stock market rally.
But Japan’s third-quarter economic growth came in at a final reading of 0.3 percent, down from an initial figure of 0.5 percent—and a sharp slowdown from 0.9-percent expansion in the previous quarter.
On an annualized basis, which stretches the data across a full year, growth was 1.1 percent in the quarter against an initial reading of 1.9 percent.
The United States is now outperforming Japan, expanding at a revised 3.6 percent annualized rate in the third quarter.
Nikkei not influenced
The BoJ survey did little to boost investor sentiment, with Tokyo’s benchmark Nikkei 225 index closing down 1.62 percent.
Analysts said that investors are cautious ahead of the US Federal Reserve’s two-day policy meeting starting on Tuesday, as speculation grows that it will start reeling in its $85 billion-a-month bond-buying plan, known as quantitative easing.
The BoJ’s own two-day meeting starts on Thursday, with all eyes on any fresh moves from policymakers after the bank unleashed a huge monetary easing plan in April.
There is speculation that it may expand the program—which injects vast sums into the financial system—as growth slows and consumers prepare for a tax hike that critics fear will derail a budding recovery.
“The Japanese economy is improving for sure, but it is thanks to the weakening yen,” Taro Saito, senior economist at NLI Research Institute, told Agence France-Presse.
“Demand expanded in part due to a last-minute consumption boost before the tax hike. It may still take some more time before the economy reaches a self-sustained recovery,” he added.
Tokyo has approved a spending package worth almost $54 billion to offset the tax hike—to 8 percent from 5 percent—seen as crucial for bringing down Japan’s huge national debt, proportionately the worst among rich nations.
Analysts have warned that Abe’s bold pro-growth program is not enough on its own without promised economic reforms.
A proposed shake-up, including loosening labor laws and signing free trade deals, is seen as key to ushering in lasting change in the long-slumbering economy.