Confidence among Japanese businesses improved in the March quarter as weaker yen boosted expectations of an economic recovery, the quarterly Tankan survey showed Monday. The survey is closely watched by the Bank of Japan for formulating policies.
The sentiment index for large manufacturers rose to -8 in the March survey, up from -12 in the December survey. This was, however, marginally weaker than the expected score of -7.
Big manufacturers expect conditions to improve further over the next three months. The relevant business outlook index rose to -1 from -10 in the previous survey. This was also slightly weaker than the expected reading of 1.
Improved sentiment largely reflected the recent depreciation of yen, as a result of bold policy actions by the government led by Prime Minister Shinzo Abe. Abe, a strong advocate of aggressive monetary easing, has pledged to end deflation to fuel economic recovery.
Bank of Japan's new governor Haruhiko Kuroda, who shares Abe policy views, is set to chair his first policy board meeting on April 3-4. Kuroda has vowed to attain 2 percent inflation within two years. Further, expectations of more monetary stimulus from the BoJ also appeared to have bolstered business sentiment.
The survey showed that confidence among large non-manufacturers also improved in three months to March with the index rising to 6 from 4 in the December survey. This was forecast to rise to 8. Large non-manufacturing firms too were optimistic about the business prospects. The corresponding index climbed to 9 from 3 compared to expected reading of 11.
Big firms, however, remained cautious about their future investment and plans to cut capital spending by 2 percent in the current fiscal year starting April 1, 2013. This compares to a 6.8 percent increase planned in the December survey. Economists were expecting a 5 percent increase in capital expenditure. The BOJ surveyed 10,698 companies between February 25 and March 29, with a 98.9 percent response rate.
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