An increasing number of major Japanese businesses are less pessimistic about the economy, as earnings and share prices have started picking up, according to a recent Kyodo News survey of executives at 100 big firms.

The survey, conducted in July, showed that at 85 firms, executives feel the economy remains basically flat, up from 77 companies in the previous survey late last year.

At six companies, executives said the economy “is slowly contracting,” down from 14 last year. There were no companies where executives saw the economy as having contracted. In contrast, managers at eight firms saw activity “slowly expanding,” up from six, according to the poll.

The survey counted Toyota Motor Corp., NTT DoCoMo Inc., Sony Corp., Canon Inc., Asahi Kasei Corp., Nomura Holdings Inc. and Mizuho Financial Group Inc. among the 100.

The improved perceptions followed strong earnings results released by an increasing number of businesses that have restructured, as well as an upturn in the stock market.

The Tokyo Stock Exchange’s benchmark 225-issue Nikkei index bounced back rapidly after hitting a string of 20-year lows in April, climbing briefly above the psychologically important 10,000-point threshold in early July.

The rebound has apparently bolstered corporate sentiment and prompted perceptions that the long-battered stock market and the economy as a whole have begun emerging from a trough.

But at the same time, the respondents were cautious over the outlook for the economy, with nearly half expecting that Japan will not be able to overcome deflation at least until spring 2005.

Forty companies said their earnings results for the April-June quarter matched their expectations, while 19 said their results were either “a little weaker than expected” or “considerably weaker than expected.”

Only eight firms said their results turned out to be “a little better than expected” or “considerably better than expected.”

But for the whole of the current fiscal year to next March, based on forecasts made after their April-June results took shape, 65 companies said they expect their results to stay within their earlier expectations.

With no signs indicating an end to lingering deflationary pressure, 44 firms said Japan can ride out deflation only in fiscal 2005 or later, while 21 firms predicted the country will remain trapped in deflation “for several years.”

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