Eighty-seven percent of 111 major Japanese firms expect the economy to expand in 2015, showing optimism after the two consecutive quarters of contraction caused by last April’s consumption tax hike, a survey says.
According to the survey, conducted in early and mid-December by Kyodo News, 97 companies expect the economy to expand, with 90 projecting moderate growth and seven strong growth. Thirteen expect the economy to level off and one made no prediction. None forecast a contraction. A breakdown of the types of companies surveyed was not provided.
A recovery in nonresidential investment was cited by 44 of the optimistic firms as a major factor in their assessments, while 40 cited the improving U.S. economy and 36 expected a rise in private consumption.
In the meantime, 56 companies said the impact of the first stage of the consumption tax hike was greater than expected, and 58 believe private consumption has already recovered or will recover by March.
Thirty-seven companies said the yen’s depreciation will have a positive impact on operating profit in fiscal 2014, which ends in March 2015, while only nine view the weakened yen as a danger to profits.
Thirty firms have not yet passed the increased cost of raw materials caused by the yen drop to consumers yet, but the weaker currency has not discouraged Japanese firms from expanding overseas. Fifty-seven plan to make overseas business account for a greater share of overall sales in fiscal 2015, while 15 intend to keep their ratios as is. Only one firm expects to reduce the overseas share.
Southeast Asia was cited as a major overseas investment target by 56 companies, the United States by 20 and China by 11.
Asked what a desirable dollar-yen exchange rate would be, 34 chose a range of ¥100 to ¥110 and 18 suggested a range of ¥110 to ¥120. Only four favored a higher exchange rate.
On whether they would hike wages in fiscal 2015 as requested by Prime Minister Shinzo Abe, 72 companies refrained from answering ahead of the annual spring wage negotiations and only four vowed to increase basic wages.
As many as 87 firms gave positive ratings to Prime Minister Shinzo Abe’s deflation-busting Abenomics policies, including nine who were very enthusiastic about the program and its “three arrows.”
Asked to specify what they valued about Abenomics, 51 of the 87 positive firms picked the promotion of the Bank of Japan’s monetary easing, 36 corporate tax reform and 22 his economic growth strategy.
Among priority policy measures for the government, 49 firms called for cutting the effective corporate tax rate, 44 for steady implementation of the growth strategy, 26 for fiscal consolidation, 25 for bold deregulation, and 19 for promotion of the Trans-Pacific Partnership and other free trade deals.
On Abe’s decision to postpone the second stage of the consumption tax hike planned for October 2015, 45 firms supported it and 24 were against it.
In addition, 55 endorsed his plan to go ahead with the second hike to 10 percent from 8 percent regardless of the economic situation in April 2017, while 35 called for taking economic conditions into account. The second hike will complete the levy’s doubling to 10 percent.