Japan's business confidence holds near 2-yr high
Japan's key barometer of business confidence unexpectedly held near a two-year high and companies increased spending plans.
By Agencies |
TOKYO: Japan’s key barometer of business confidence unexpectedly held near a two-year high and companies increased spending plans, shrugging off a slowdown in the US, the nation’s largest export market. The Bank of Japan’s quarterly Tankan index of sentiment at large manufacturers stayed at 23 points in September from June, the central bank said on Monday in Tokyo. The median estimate of 32 economists was for a decline to 21 points. A positive number means optimists outnumber pessimists.
Japan’s biggest companies plan to step up investment by 8.7% in the year ending March, faster than June’s projection, undeterred by the worst US housing recession since 1991. Hitachi’s venture with Matsushita Electric Industrial and Toshiba said last week it will boost spending to make more liquid crystal displays used in televisions.
“Japan’s economy appears to be weathering the storm quite well,” said Graham Davis, director of the Economist Intelligence Unit in Tokyo. “With the external environment in such turmoil, you may have expected the numbers to be worse.” The yen traded at 115.06 per dollar at 12:45 pm in Tokyo from 114.93 before the report. The yield on Japan’s 10-year bond fell 2 basis points to 1.655%.
Economists said the Tankan report suggests Bank of Japan governor Toshihiko Fukui may raise interest rates, the lowest in the industrialised world, later this year. “Companies’ confidence remains intact despite the financial-market turmoil and possible US slowdown,” said Takehiro Sato, chief economist at Morgan Stanley Securities Japan in Tokyo. “We can’t rule out the possibility of a December rate hike.”
Central bank policy makers have emphasised that keeping the key overnight lending rate at 0.5% may cause the economy to overheat and end its longest expansion in more than 60 years. Miyako Suda, one of the board’s nine members, said last week that “early” action on interest rates was desirable.
Investors see a 6% chance the bank will raise rates when it concludes its next policy meeting on October 11, according to Credit Suisse Group calculations based on interest payments.
The Tankan, which means short-term economic outlook in Japanese, asked 10,750 companies for their views on sales, profit, spending, hiring and confidence. They were surveyed from August 28 to September 28, making the Tankan the nation’s most current snapshot of corporate activity.
Large manufacturers said they expect the yen to trade at an average 115.20 against the dollar in the year ending March, weaker than the 114.40 they estimated in June.
The yen has gained 7% since the collapse of the US subprime mortgage market prompted investors to sell higher-yielding assets. It’s still weaker than the 106.6 level, at which most exporters say they can stay profitable. Large companies increased their profit and sales estimates for the current fiscal year, the Tankan showed.
Profit at Canon, the world’s largest maker of digital cameras, rose 17% in the quarter ended June 30, the most recent figures show. Toyota Motor’s profit climbed by more than a third to a record in the same period. Labour shortages among large manufacturers are intensifying, resulting in the tightest employment market in 15 years. The Tankan’s index measuring demand for workers fell to minus 7, matching March’s level, the lowest since 1992. A negative number means companies are short of manpower.
Unemployment near a nine-year low is beginning to spur wages in the world’s second-largest economy. Wages increased 0.1% in August, the Labour Ministry said on Monday, the first gain in nine months. Reports last week signalled that the economy may rebound after contracting in Q2. Industrial production rose to a record in August and household spending climbed at the quickest rate in almost two years.
IPS Alpha Technology, 50% controlled by Hitachi, said last week it will invest about 9 billion yen ($78 million) to increase output of LCD displays for flat-panel televisions.
“Capital spending is set to rebound this quarter,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo. “Companies are very cash-rich and their desire to spend hasn’t been affected by the recent turmoil in financial markets.”
Still, businesses remain wary that the US housing slump will slow global economic growth. Large manufacturers’ confidence is expected to deteriorate to 19 in December, the report showed. Sentiment in the headline category climbed to a two-year high of 25 in December 2006 and has been at 23 in the three surveys since.
Confidence among large service companies fell to 20 points last quarter from a 15-year high of 22. They expect sentiment to improve to 21 in December. “This report alone isn’t strong enough to support a rate increase,” said Seiji Adachi, senior economist at Deutsche Securities in Tokyo. “We may see the subprime issue having an effect soon, making a rate increase difficult this year.”
Japan’s biggest companies plan to step up investment by 8.7% in the year ending March, faster than June’s projection, undeterred by the worst US housing recession since 1991. Hitachi’s venture with Matsushita Electric Industrial and Toshiba said last week it will boost spending to make more liquid crystal displays used in televisions.
“Japan’s economy appears to be weathering the storm quite well,” said Graham Davis, director of the Economist Intelligence Unit in Tokyo. “With the external environment in such turmoil, you may have expected the numbers to be worse.” The yen traded at 115.06 per dollar at 12:45 pm in Tokyo from 114.93 before the report. The yield on Japan’s 10-year bond fell 2 basis points to 1.655%.
Economists said the Tankan report suggests Bank of Japan governor Toshihiko Fukui may raise interest rates, the lowest in the industrialised world, later this year. “Companies’ confidence remains intact despite the financial-market turmoil and possible US slowdown,” said Takehiro Sato, chief economist at Morgan Stanley Securities Japan in Tokyo. “We can’t rule out the possibility of a December rate hike.”
Central bank policy makers have emphasised that keeping the key overnight lending rate at 0.5% may cause the economy to overheat and end its longest expansion in more than 60 years. Miyako Suda, one of the board’s nine members, said last week that “early” action on interest rates was desirable.
Investors see a 6% chance the bank will raise rates when it concludes its next policy meeting on October 11, according to Credit Suisse Group calculations based on interest payments.
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The Tankan, which means short-term economic outlook in Japanese, asked 10,750 companies for their views on sales, profit, spending, hiring and confidence. They were surveyed from August 28 to September 28, making the Tankan the nation’s most current snapshot of corporate activity.
Large manufacturers said they expect the yen to trade at an average 115.20 against the dollar in the year ending March, weaker than the 114.40 they estimated in June.
The yen has gained 7% since the collapse of the US subprime mortgage market prompted investors to sell higher-yielding assets. It’s still weaker than the 106.6 level, at which most exporters say they can stay profitable. Large companies increased their profit and sales estimates for the current fiscal year, the Tankan showed.
Profit at Canon, the world’s largest maker of digital cameras, rose 17% in the quarter ended June 30, the most recent figures show. Toyota Motor’s profit climbed by more than a third to a record in the same period. Labour shortages among large manufacturers are intensifying, resulting in the tightest employment market in 15 years. The Tankan’s index measuring demand for workers fell to minus 7, matching March’s level, the lowest since 1992. A negative number means companies are short of manpower.
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Unemployment near a nine-year low is beginning to spur wages in the world’s second-largest economy. Wages increased 0.1% in August, the Labour Ministry said on Monday, the first gain in nine months. Reports last week signalled that the economy may rebound after contracting in Q2. Industrial production rose to a record in August and household spending climbed at the quickest rate in almost two years.
IPS Alpha Technology, 50% controlled by Hitachi, said last week it will invest about 9 billion yen ($78 million) to increase output of LCD displays for flat-panel televisions.
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“Capital spending is set to rebound this quarter,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo. “Companies are very cash-rich and their desire to spend hasn’t been affected by the recent turmoil in financial markets.”
Still, businesses remain wary that the US housing slump will slow global economic growth. Large manufacturers’ confidence is expected to deteriorate to 19 in December, the report showed. Sentiment in the headline category climbed to a two-year high of 25 in December 2006 and has been at 23 in the three surveys since.
Confidence among large service companies fell to 20 points last quarter from a 15-year high of 22. They expect sentiment to improve to 21 in December. “This report alone isn’t strong enough to support a rate increase,” said Seiji Adachi, senior economist at Deutsche Securities in Tokyo. “We may see the subprime issue having an effect soon, making a rate increase difficult this year.”
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