TOKYO: Japanese manufacturing confidence improved in January for the first time in three months, a Reuters poll showed, in a sign the economy is likely to start picking up after a small contraction expected in the final quarter of 2010.
The yen's slight pullback from 15-year highs and expectations for recovery in the United States helped ease some concerns about business conditions, with the mood of manufacturers seen remaining firm over the next three months, the monthly Reuters Tankan showed on Thursday, Jan 20.
Service-sector firms became the least pessimistic since June 2008 and their sentiment is seen edging up further in April, according to the poll of 400 large firms, of which 230 responded, taken Jan. 4-17.
The monthly poll, which has a 95 percent correlation with the Bank of Japan's closely watched quarterly tankan survey, showed a turnaround in corporate mood from last month when manufacturers were increasingly wary about the outlook due to a strong yen and slowing exports.
The reading from the Reuters Tankan chimes with the view shared by the central bank and private-sector economists that the Japanese economy will resume a moderate recovery this year on the back of exports, particularly to emerging markets.
But companies also voiced concerns about rising commodity prices, sluggish demand at home, stubborn deflation and a strong yen, which squeeze their profits.
In the Reuters Tankan, the manufacturing sentiment index, derived by subtracting the percentage of pessimistic respondents from optimistic ones, rose four points from December to plus 11 -- half a recent peak of plus 22 hit in August -- and is seen remaining unchanged over the next three months.
The mood of non-manufacturers grew 10 points to minus 2, its highest reading since June 2008 and is seen climbing to minus 1, although this is still below zero, meaning pessimists have outnumbered optimists since 2008.
"In Japan we face a decline in demand in reaction to the expiry of government subsidies for low-emission auto purchases, but we are doing relatively well in emerging economies," a transport equipment producer said in the survey.
An electric machinery maker said: "We can expect growth in Asia, but the economic outlook in developed countries remains unclear. On top of this, a strong yen is taking root."
In the last BOJ tankan in December, manufacturers' business sentiment worsened for the first time in nearly two years and they expected the situation to deteriorate further over the next three months.
While the Reuters Tankan has a close correlation with the BOJ tankan, the two surveys target different types and numbers of sample firms.
The BOJ last year cut interest rates effectively to zero and set up a 5 trillion yen ($60 billion) pool of funds to buy assets ranging from government bonds to private debt, aiming to support a fragile economy and pull Japan out of deflation.
At its next rate review on Jan. 24-25, the central bank is expected to make minor tweaks to its growth forecasts but will stick to its view that the economy will resume a moderate recovery later this year, according to sources familiar with the BOJ's thinking. - Reuters
The yen's slight pullback from 15-year highs and expectations for recovery in the United States helped ease some concerns about business conditions, with the mood of manufacturers seen remaining firm over the next three months, the monthly Reuters Tankan showed on Thursday, Jan 20.
Service-sector firms became the least pessimistic since June 2008 and their sentiment is seen edging up further in April, according to the poll of 400 large firms, of which 230 responded, taken Jan. 4-17.
The monthly poll, which has a 95 percent correlation with the Bank of Japan's closely watched quarterly tankan survey, showed a turnaround in corporate mood from last month when manufacturers were increasingly wary about the outlook due to a strong yen and slowing exports.
The reading from the Reuters Tankan chimes with the view shared by the central bank and private-sector economists that the Japanese economy will resume a moderate recovery this year on the back of exports, particularly to emerging markets.
But companies also voiced concerns about rising commodity prices, sluggish demand at home, stubborn deflation and a strong yen, which squeeze their profits.
In the Reuters Tankan, the manufacturing sentiment index, derived by subtracting the percentage of pessimistic respondents from optimistic ones, rose four points from December to plus 11 -- half a recent peak of plus 22 hit in August -- and is seen remaining unchanged over the next three months.
The mood of non-manufacturers grew 10 points to minus 2, its highest reading since June 2008 and is seen climbing to minus 1, although this is still below zero, meaning pessimists have outnumbered optimists since 2008.
"In Japan we face a decline in demand in reaction to the expiry of government subsidies for low-emission auto purchases, but we are doing relatively well in emerging economies," a transport equipment producer said in the survey.
An electric machinery maker said: "We can expect growth in Asia, but the economic outlook in developed countries remains unclear. On top of this, a strong yen is taking root."
In the last BOJ tankan in December, manufacturers' business sentiment worsened for the first time in nearly two years and they expected the situation to deteriorate further over the next three months.
While the Reuters Tankan has a close correlation with the BOJ tankan, the two surveys target different types and numbers of sample firms.
The BOJ last year cut interest rates effectively to zero and set up a 5 trillion yen ($60 billion) pool of funds to buy assets ranging from government bonds to private debt, aiming to support a fragile economy and pull Japan out of deflation.
At its next rate review on Jan. 24-25, the central bank is expected to make minor tweaks to its growth forecasts but will stick to its view that the economy will resume a moderate recovery later this year, according to sources familiar with the BOJ's thinking. - Reuters
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