The Bank of Japan’s quarterly “tankan” survey startled most market analysts June 25 by reflecting unexpectedly strong business sentiment among the nation’s principal manufacturing firms.

But in contrast, the 2 percentage point hike in the consumption tax on April 1 and a continuing decrease in public works spending took their toll on both major and smaller nonmanufacturers, whose business confidence worsened over the past three months. Although the results of the survey basically indicate that the economy is firming up, they also show that the recovery is only barely trickling down to smaller firms.

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