Pessimism over the nation’s economic woes has eased among corporations, albeit only slightly, during the past three months, according to the Bank of Japan’s latest “tankan” business sentiment survey released Monday.
The BOJ’s quarterly survey for March was in line with last month’s upward revision of the bank’s economic assessment, which says conditions appear to have stopped deteriorating.
The latest tankan results show the first improvement since June 1997. Taken from the beginning of March, the survey also seems to indicate that the government’s economic stimulus package and the BOJ’s extra-easy monetary policy are easing the financial squeeze.
Furthermore, a recent rebound in stock prices seems to be contributing to the slightly upward trend. During the survey period, the Nikkei-225 average on the Tokyo Stock Exchange soared to the 16,300 yen level from below 14,000 yen.
But economists have been quick to point out that it is too early to say the economy is on a recovery track, as the firms plan significant cutbacks in capital investment and seem poised to further cut their workforce.
The survey had a fleeting effect on the Nikkei average, which at one point in the day topped the 16,500 line for the first time since July before losing most of its gains in the afternoon and closing at 16,334.78, up 44.59 points from Friday.
The March tankan shows that the diffusion index — the percentage of firms that feel business is favorable minus those that feel business is unfavorable — for large manufacturers edged up to minus 47 from minus 49 recorded in the December survey. This is the first improvement since June 1997, when business sentiment for such companies moved up one point.
Business confidence for large nonmanufacturers has also improved to minus 34, up 5 points from the previous survey, logging the first rise since June.
Among small and midsize manufacturers, the index was minus 53, up 3 points from December. Business confidence for smaller nonmanufacturers also logged an improvement of 5 points, moving the index up to minus 38.
Shosaku Murayama, head of the BOJ’s research and statistics department, declined comment when asked whether the latest tankan figures came as confirmation for the central bank’s earlier judgment that the economy has stopped deteriorating for the moment.
Instead, he simply said that the bank will give its official assessment on the figures in its next monthly report due out April 13. “The tankan this time shows a trend that firms are quite cautious and have projected cautious future prospects in areas such as sales volumes, corporate equipment and employment,” Murayama said. “But the diffusion index at the moment shows a slight improvement.”