Confidence among Japan’s biggest manufacturers is at an 11-year high, a key Bank of Japan survey showed yesterday, as the world’s number-three economy picks up pace.
The central bank’s Tankan report — a quarterly survey of more than 10,000 companies — showed a reading of 25 among major manufacturers in its survey for this month, the highest since its December 2006 poll.
The report, the broadest indicator of how Japan Inc is faring, marks the difference between the percentage of firms that are upbeat and those that see conditions as unfavourable.
The mood among major manufacturers has now risen for a fifth straight quarter.
Buoyed by a favourable outlook, the firms said they plan on average to boost capital spending by 10.2 percent year-on-year, the survey showed.
The index for non-manufacturers came in at 23, unchanged from the previous survey in October. This is the highest level since the final quarter of 2015.
The upbeat survey underscores how Japan’s prospects have been improving on strong exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.
“The strong reading reflects major manufacturers’ sound performance, thanks to brisk demand in the global economy,” NLI Research Institute economist Tsuyoshi Ueno said.
However, he added that firms “remain cautious about various risks including geopolitical concerns over North Korea and the Middle East.”
The report is a boost for Prime Minister Shinzo Abe, who swept to power in late 2012 on a pledge to cement a lasting recovery in the once booming economy with a growth plan dubbed “Abenomics.”
The scheme — a mix of aggressive monetary easing and huge government spending along with reforms to the economy — fattened corporate profits and sent the stock market higher.
However, it has failed in its goal of shrugging off the deflation that has plagued Japan for years and held back growth.
Japan’s latest inflation rate of 0.8 percent is still nowhere near the Bank of Japan’s 2 percent target, despite years of record monetary easing.
However, the economy expanded by 0.6 percent in the July-to-September period, posting its longest string of gains in more than two decades.
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