The nation’s large manufacturers are more confident about business conditions but have yet to recover their prequake optimism, the Bank of Japan’s quarterly “tankan” sentiment index said Monday.
While midsize and small manufacturers did not share the sense of strong recovery, the sentiment index for big manufacturers — companies capitalized at ¥1 billion or more — climbed 11 points to 2 in September compared with minus 9 in June.
The improvement in sentiment was largely due to the recovery of the supply chain, which was reflected by a 65-point rebound by automakers to 13 from the June survey.
The March earthquake and tsunami in the Tohoku region disrupted supply chains nationwide, leading to acute parts shortages and sending the business sentiment plunging in the previous survey.
The hike in the index for automakers was the largest in the industry since the BOJ launched the tankan. The figures are determined by subtracting the percentage of companies with bad business sentiment from companies with a positive business outlook.
The quarterly survey covered 10,910 firms between Aug. 29 and Sept. 30 and drew responses from 98.8 percent of them.
Economists saw Monday’s results as a sign that Japanese companies are taking strong steps toward recovery. But they also warned that uncertainties lie ahead and that it is too early to declare a full upturn.
“Tankan numbers confirm what other statistics have been showing recently, and it’s that the supply chains are mostly back to normal following the earthquake,” said Satoru Ogasawara, an economist at Credit Suisse.
But the expert pointed to the sovereign credit risks in Europe as well as the strong yen as two tangible concerns. While the domestic economy is on course to recover from the devastating consequences of the catastrophe, the strong yen, which is hovering at record high rates against the dollar, will no doubt become a shackle for Japanese exporters.
In fact, Monday’s survey was based on an estimated exchange rate of ¥81.15 to the dollar.
“In reality, the yen is being traded at around 76 to the dollar. That is a concern and may have an impact on exporters and their future growth,” Credit Suisse’s Ogasawara said.
In regards to the sovereign debt crisis in Europe, Ogasawara noted that it may also hamper recovery in Japan.
“There is unease over a recession on a global scale,” he said, adding this could impact the domestic economy in the following months.
Business sentiment among smaller companies remained below zero despite signs of recovery in Monday’s tankan, with midsize companies turning in readings of minus 3 in September, compared with minus 12 in June.
Small companies came in at minus 11, up 10 points from minus 21 in June. Sentiment among large nonmanufacturers jumped up 6 points from June to 1.