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192347
Fri, 07/01/2011 - 18:23
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http://m.oananews.org//node/192347
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Tankan sentiment down but shows brighter prospects
TOKYO (Kyodo) - The Bank of Japan's Tankan survey showed Friday that business sentiment among large Japanese companies is set to improve in the coming months, although the June poll marked a sharper-than-expected deterioration for the last three months following the March 11 earthquake-tsunami disaster.
The central bank is now expected to downgrade its earlier forecast of fiscal 2011 economic growth. In light of the signs of recovery, however, it is unlikely to go as far as projecting a negative growth in the year through next March, as done by private-sector think tanks.
Analysts say the latest Tankan indicates the worst may be over for major manufacturers, such as automakers and technology firms, as they address nationwide supply-chain disruptions following the March disaster that led to downward pressures on production and exports.
The index of business confidence fell to minus 9 in June among major manufacturers from plus 6 in March but is expected to improve to plus 2 in September. The figures are calculated by subtracting the percentage of companies reporting deterioration in business conditions from that of firms observing improvement.
The June result, the first negative reading in five quarters, was weaker than the average forecast of a decline to minus 6 in a Kyodo News survey. It was the first deterioration in two quarters, with the March survey not fully reflecting the impact from the earthquake.
Big nonmanufacturers' confidence is likely to improve to minus 2 during the upcoming quarter, although the June survey showed it fell to minus 5 from plus 3 against the average estimate of a slide to minus 4. The natural disaster significantly hurt confidence, especially among the utility, restaurant and lodging industries.
Adding to brighter signs, large companies in all sectors plan to boost capital spending by an average 4.2 percent in fiscal 2011, which ends next March, from the previous year, marking a turnaround as they had forecast a 0.4 percent reduction in the March poll.
''The latest Tankan revealed a faster recovery in sentiment than earlier thought,'' said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute. ''Large manufacturers have been aided by recovering exports on the back of brisk overseas economies.''
But Kumano also pointed to some downside risks to further recovery, including electricity supply shortages in the aftermath of the March disaster as well as economic slowdown in major trading partners, mainly China and the United States.
The BOJ is now considering lowering its estimate of real gross domestic product growth in fiscal 2011 to between 0.1 and 0.4 percent from its April forecast of 0.6 percent, sources close to the matter said.
Its Policy Board is to release revised growth and inflation forecasts for fiscal 2011 and 2012 after a two-day meeting through July 12. As for fiscal 2012, the nine-member board is unlikely to diverge significantly from its earlier projection of 2.9 percent growth, the sources said.
In the latest Tankan, the BOJ surveyed 10,997 companies, also including small and midsize firms, between May 30 and June 30, of which 98.2 percent provided valid responses.
By industry, carmakers forecast their index will register the biggest-ever rise -- from minus 52 to plus 6 -- in three months' time on hopes that supply-side constraints will be addressed in the fall. In June, the index dropped to minus 52 from plus 23, the sharpest-ever decline since the BOJ began compiling the figures in 1992.
Electric machinery makers saw their index fall to minus 16 from plus 1, while projecting an improvement to plus 2.
Among nonmanufacturers, utility firms suffered a fall to minus 3 from plus 17 as electricity companies came under scrutiny over nuclear power generation around the world as a result of the crisis at the tsunami-ravaged Fukushima Daiichi plant. They expect a further fall to minus 7.
The index for small and midsize manufacturers fell to minus 21 from minus 10 and is expected to recover to minus 15. As for small nonmanufacturers, the reading slid to minus 26 from minus 19 and is projected to further deteriorate to minus 29.
The central bank is now expected to downgrade its earlier forecast of fiscal 2011 economic growth. In light of the signs of recovery, however, it is unlikely to go as far as projecting a negative growth in the year through next March, as done by private-sector think tanks.
Analysts say the latest Tankan indicates the worst may be over for major manufacturers, such as automakers and technology firms, as they address nationwide supply-chain disruptions following the March disaster that led to downward pressures on production and exports.
The index of business confidence fell to minus 9 in June among major manufacturers from plus 6 in March but is expected to improve to plus 2 in September. The figures are calculated by subtracting the percentage of companies reporting deterioration in business conditions from that of firms observing improvement.
The June result, the first negative reading in five quarters, was weaker than the average forecast of a decline to minus 6 in a Kyodo News survey. It was the first deterioration in two quarters, with the March survey not fully reflecting the impact from the earthquake.
Big nonmanufacturers' confidence is likely to improve to minus 2 during the upcoming quarter, although the June survey showed it fell to minus 5 from plus 3 against the average estimate of a slide to minus 4. The natural disaster significantly hurt confidence, especially among the utility, restaurant and lodging industries.
Adding to brighter signs, large companies in all sectors plan to boost capital spending by an average 4.2 percent in fiscal 2011, which ends next March, from the previous year, marking a turnaround as they had forecast a 0.4 percent reduction in the March poll.
''The latest Tankan revealed a faster recovery in sentiment than earlier thought,'' said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute. ''Large manufacturers have been aided by recovering exports on the back of brisk overseas economies.''
But Kumano also pointed to some downside risks to further recovery, including electricity supply shortages in the aftermath of the March disaster as well as economic slowdown in major trading partners, mainly China and the United States.
The BOJ is now considering lowering its estimate of real gross domestic product growth in fiscal 2011 to between 0.1 and 0.4 percent from its April forecast of 0.6 percent, sources close to the matter said.
Its Policy Board is to release revised growth and inflation forecasts for fiscal 2011 and 2012 after a two-day meeting through July 12. As for fiscal 2012, the nine-member board is unlikely to diverge significantly from its earlier projection of 2.9 percent growth, the sources said.
In the latest Tankan, the BOJ surveyed 10,997 companies, also including small and midsize firms, between May 30 and June 30, of which 98.2 percent provided valid responses.
By industry, carmakers forecast their index will register the biggest-ever rise -- from minus 52 to plus 6 -- in three months' time on hopes that supply-side constraints will be addressed in the fall. In June, the index dropped to minus 52 from plus 23, the sharpest-ever decline since the BOJ began compiling the figures in 1992.
Electric machinery makers saw their index fall to minus 16 from plus 1, while projecting an improvement to plus 2.
Among nonmanufacturers, utility firms suffered a fall to minus 3 from plus 17 as electricity companies came under scrutiny over nuclear power generation around the world as a result of the crisis at the tsunami-ravaged Fukushima Daiichi plant. They expect a further fall to minus 7.
The index for small and midsize manufacturers fell to minus 21 from minus 10 and is expected to recover to minus 15. As for small nonmanufacturers, the reading slid to minus 26 from minus 19 and is projected to further deteriorate to minus 29.
