TOKYO: Big Japanese firms now feel more confident about business conditions than at any time in the past six years, thanks to robust exports, but are cautious about whether the recovery can be sustained, a key survey showed yesterday.
The Bank of Japans tankan survey of business confidence showed the diffusion index for large manufacturers rose to plus 11 in December from plus one in the previous survey in September.
That was better than expectations of plus six in a Reuters poll last week and the best figure since plus 13 in June 1997, underscoring data showing the economy is expanding on the back of strong global demand for Japans high-tech goods.
It does tell us the economic cycle has improved considerably in the past three months, especially on the side of manufacturing, said Richard Jerram, an economist at ING Baring Securities here.
But the index for March, which measures confidence in business conditions over the next three months, showed a slightly weaker reading of plus eight.
The diffusion index is produced by subtracting the percentage of companies reporting unfavourable conditions from those giving favourable responses. A positive number means optimists outnumber pessimists.
Its a sign we cant be too optimistic about Japans recovery. I think the rise in the yen is making many companies cautious, UFJ Bank economist Takashi Yamanaka said.
A stronger yen can make exporters goods less competitive overseas and dent the value of profits when repatriated.
Data earlier this week showed Japans real gross domestic product (GDP) grew 0.3% in JulySeptember from the previous quarter, down from an initial estimate of 0.6% but still the sixth straight quarter of expansion.
And separate government data yesterday showed industrial production rose 1% in October from September, an upward revision from a previous estimate of a 0.8% rise. Reuters