BoJ Tankan survey reveals sentiment up, but outlook grim

| September 29, 2010

The Bank of Japan’s (BoJ) closely watched quarterly Tankan survey has revealed business confidence continues to rise, despite concerns about a strong yen.

The Tankan index revealed business confidence among major manufacturers had picked up for the sixth consecutive quarter, rising to a better than expected reading of 8 in September, from 1 in June.

The Tankan figures are closely monitored by the BoJ when deciding monetary policy. The Bank has recently come under pressure to take more action to stimulate the economy.

The survey hit a record low of -58 in early 2009, but has gradually recovered since that time.

The Tankan, which surveys 10,000 firms, measures the percentage of companies that think business conditions are good, minus those that believe they are bad.

Top manufacturers, who participated in the survey, said they expected confidence to fall back to -1 by December, because of a strong yen, which means demand for exports has weakened.

Earlier this week, it was revealed that Japanese exports slowed further in August – the sixth consecutive month in which they have eased.

The figures raise concern that the economic recovery is faltering because exports are a crucial driver for Japan’s growth.

Exports rose 15.8% in August to 5.22 trillion yen on an annual basis – well below the 45.3% high seen in February.

The figures come as the yen reached a 15-year high against the US dollar earlier this month – leading to the country’s central bank to take action to weaken its currency.
It was the first time in six years that such action had been taken.

Japan’s fragile recovery has raised concern among analysts, with many suggesting it is at risk of a double-dip recession.

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