Japan business mood hits near six-year high, Abe set to raise taxReuters . Tokyo / New Age Online
Japanese manufacturers' sentiment improved sharply in the three months to September to a near six-year high, a closely-watched central bank survey showed, cementing the case for Premier Shinzo Abe to proceed with a planned sales tax hike next year.
Service-sector sentiment also brightened slightly and big companies plan to increase capital spending, a sign robust personal consumption and a pickup in exports are solidifying a recovery in the world's third-largest economy.
The latest result made it a near certainty Abe will give the go-ahead of the tax hike on Tuesday, and compile a stimulus package to cushion the blow to the economy, analysts said.
"This is very constructive in terms of the assessment of the current economic situation. There is no reason that Abe should stop raising the sales tax," said Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo.
But there were signs the improvement in mood may have peaked partly due to uncertainty on overseas economies, underscoring the challenge policymakers face in sustaining the positive momentum long enough to persuade firms to raise wages.
The headline index for big manufacturers' sentiment rose 8 points to plus 12 in September, much better than a median market forecast for plus 7, the Bank of Japan's "tankan" quarterly survey showed on Tuesday.
It was the third straight quarter of improvement and the highest reading since the survey of December 2007, suggesting that the feel-good mood generated by Abe's reflationary policies is broadening.
The sentiment index for big non-manufacturers also rose 2 points to plus 14 in September with hopes for bigger public works spending lifting morale among construction firms.
Abe has cited the tankan outcome as key factor in deciding whether to raise the sales tax from next April to 8 percent from 5 percent, which is part of a two-stage increase in the tax rate aimed at fixing Japan's tattered finances.
WAGES KEEP FALLING
Japan's economy expanded for three straight quarters in April-June, outpacing many G7 nations, as Abe's reflationary policies bolstered household spending and drove down the yen, benefiting exports.
The BOJ also offered an intense burst of stimulus in April, pledging to double the base money via aggressive asset purchases to achieve its 2 percent inflation target in two years.
Sentiment improved sharply for sectors that benefit from a weak yen, such as automakers and electronic goods makers. Big manufacturers revised down their yen forecasts for the current business year to 94.45 to the dollar, from 91.20 yen in the previous tankan survey.
But there were some signs of potential weakness in the outlook: Both big manufacturers and non-manufacturers expect business conditions to stay largely unchanged three months ahead, a sign the improvement in mood may have peaked.
Big firms plan to increase capital spending by 5.1 percent in the current fiscal year to next March, lower than 6.0 percent projected in a Reuters poll. That was largely unchanged from their plan three months ago, despite government plans to boost tax incentives to encourage companies into spending more.
"There's a gap between improving sentiment and the state of the real economy, which slowed somewhat in July-August as shown by recent indicators such as exports, factory output and consumption," said Naoki Iizuka, economist at Citigroup Global Markets Japan.
The BOJ raised its assessment of the economy in September to say it was recovering moderately but some officials worry about slowing growth in emerging economies, many of which are big markets for Japanese cars and electronic goods.
Another concern for policymakers is whether companies will finally start to raise wages, instead of sitting on a huge pile of cash, so that consumers have more money to spend.
So far, the signs are not good. Wage earners' total cash earnings fell 0.6 percent in the year to August with regular pay down for 15 months in a row, government data showed on Tuesday.
Separate data showed household spending fell 1.6 percent in August from a year earlier, a sign the rising cost of daily necessities may be weighing on consumer spending.
Such weak signs may be discussed at the BOJ's two-day rate review that ends on Friday, although the central bank is widely expected to keep its monetary settings unchanged.
The tankan's sentiment indexes are derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.
comments powered by Disqus
Reiterating her firm determination to complete the trial of war criminals, Prime Minister Sheikh Hasina Tuesday sought support of the friends of Liberation War to this end... Full story
Selling of train tickets in advance is set to start tomorrow (Wednesday) in Dhaka and Chittagong railway stations to ensure smooth journey of the homebound passengers to celebrate Eid-ul-Azha with their near and dear ones at their village homes... Full story
Information minister Hasanul Haq Inu on Tuesday said the verdict against BNP standing committee member Salauddin Quader Chowdhury has proved that nobody is beyond law... Full story
BNP chairperson’s adviser Khandker Mahbub Hossain has termed as ‘farcical’ and reflection of ‘political vendetta’ the death sentence to Salauddin Quader Chowdhury for committing war crimes... Full story
The International Crimes Tribunal-1 Tuesday morning has started reading out the verdict on BNP lawmaker Salauddin Quader Chowdhury in the case of crimes against humanity during Bangladesh’s Liberation War in 1971... Full story
BNP lawmaker Salauddin Quader Chowdhury has been taken to tribunal at 10:00am Tuesday... Full story
State minister for law Quamrul Islam said on Tuesday that the verdict against BNP standing committee member Salauddin Quader Chowdhury reflected the expectation of the people... Full story
The findings of a new survey by the international anti-corruption watchdog Transparency International on Tuesday said twelve percent people of Bangladesh paid bribe in education. Full story
The metropolitan session judge's court in Dhaka on Tuesday rejected petitions, including one seeking bail for Oishi Rahman, the prime suspect in the murder of her parents, Special Branch inspector and his wife. Full story
A Dhaka court on Tuesday has recorded the confessional statement of Nowrin Zahan, the alleged abuser of domestic help Aduri, under Section 164 of the Code of Criminal Procedure. Full story
Custom officials of Shah Amanat International Airport recovered 14 gold bars from a flight in Chittagong Tuesday morning. Full story
In the waning hours before a potential U.S. government shutdown, lawmakers expressed anxiety that some of the people hit hardest will be those who are closest to them - the army of often low-paid aides who work long hours to keep Capitol Hill going... Full story
Venezuelan President Nicolas Maduro has said he is expelling the top US diplomat and two others, accusing them of meeting with opposition leaders and encouraging "acts of sabotage" against his country...... Full story