Business sentiment improves at nation’s top manufacturers

Major firms said buoyed by 3/11 reconstruction

by Jun Hongo

Staff Writer

Business sentiment among large manufacturers improved for the first time in three quarters in the three months through June, reaching minus 1, according to the Bank of Japan’s quarterly “tankan” index released Monday.

The business index for major manufacturers — companies capitalized at ¥1 billion or more — improved 3 points from the previous survey in March.

Although a negative number indicates more pessimism than optimism, the figure came in above market expectations.

“Overall, the numbers were better than predicted,” Tsuyoshi Ueno, a senior economist at NLI Research Institute, told The Japan Times.

Ueno said reconstruction from the March 11 disaster helped domestic demand and manufacturers are more optimistic about the outlook for overseas economies.

Despite persistent concerns about the yen’s appreciation and Europe’s sovereign credit risk, large manufacturers forecast a plus 1 figure for the next tankan in September.

The tankan index is determined by subtracting the percentage of companies with bad business sentiment from those whose outlook is positive. The quarterly survey drew valid responses from 99 percent of 10,792 firms between May 29 and Friday. The latest figures show that major automakers are bullish, with a 4-point jump to 32, compared with the previous quarter.

The nonferrous metals sector meanwhile leaped 22 points to 11.

Business sentiment among major nonmanufacturers also rose, to 8 from 5, while medium-size manufacturers added 1 point to reach minus 6.

On the downside, the petroleum and coal sector plunged 33 points from the previous tankan to minus 33.

Small manufacturers fell 2 points to minus 12.

Ueno pointed out that Monday’s tankan illustrates Japan’s heavy reliance on its automobile sector.

“The carmakers have an impact on smaller companies that manufacture related products. When the automobile sector is looking up, the entire economy does the same,” the economist said. But he remained cautious about the optimistic outlook of the major manufacturers.

“The reconstruction demand is eventually going to wane, but by then most companies hope to see economies overseas pick up the pace.”