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Upcoming ‘tankan’ survey projected to be upbeat

JIJI

The Bank of Japan’s quarterly “tankan” survey for March is expected to show that business sentiment among large manufacturers has improved for the first time in three quarters, according to estimates by 17 think tanks.

The March survey, due on April 1, will be the first since new BOJ Gov. Haruhiko Kuroda took office Wednesday.

“The Japanese economy has already hit bottom,” a Mizuho Research Institute official said. This view is shared by many other think thanks because the fall in Japanese exports is grinding to a halt thanks to the yen’s depreciation, and consumer sentiment is improving thanks to surging stock prices.

The average estimate of the 17 economic research institutes stood at minus 6 for the diffusion index (DI), which gauges current business conditions at large manufacturers. This is far better than the minus 12 recorded in the December survey. All expect an improvement.

The DI, which is the most closely watched gauge in the survey, indicates the percentage of companies experiencing good business conditions minus those feeling the opposite.

The think tanks’ average forecast for the DI for June stood at plus one.

By industry, automakers are expected to show a considerable improvement because the yen’s uptrend has reversed and the sales slump caused by the termination of government subsidies for fuel-efficient vehicles in September last year is exiting the worst phase.

In contrast, sentiment at materials manufacturers may worsen due to higher costs caused by rising prices for imported materials.

The DI for large nonmanufacturers is also forecast to improve for the first time in three quarters, mainly reflecting an increase in public works projects included in the fiscal 2012 supplementary budget, enacted in February.

The think tanks are divided in their forecasts for business fixed investment in fiscal 2013, which starts in April, citing the likely improvement in business sentiment and uncertainties over the course of overseas economies.

Their average projection for capital spending by large companies calls for a 0.6 percent rise from the previous year.