TOKYO — Japanese business sentiment failed to improve as expected in the first quarter and is expected to remain muted in coming months, a survey by the central bank showed Monday, suggesting that the bank will remain under pressure to deliver more stimulus.
The headline index for sentiment among large manufacturers in the closely watched quarterly survey, known as the tankan, was minus 4 in March, unchanged from the reading in December. Readings of less than zero indicate that pessimists outnumber optimists.
The reading, which reflects broad growth trends in Japan and is one of the major policy gauges for the central bank, the Bank of Japan, was worse than the median market forecast of minus 1.
Further, big manufacturers expect conditions to improve only slightly over the next three months, with the June index predicted by survey participants to be at minus 3, compared with a median forecast among analysts of plus 2.
“The tankan result increases the likelihood of additional easing, which I already anticipate, by the Bank of Japan this month, and slightly raises the possibility of additional easing next week rather than on April 27,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
“The B.O.J. could act to signal it is trying even harder to support the economy,” he added, suggesting that the bank could increase a fund for the purchase of bonds and other assets by ¥5 trillion, or $60 billion.
That view is not universal. Others say that as long as the economy is headed for a moderate recovery this year, the situation the Bank of Japan considers most likely, there is no need for extra action to follow the surprisingly aggressive stimulus in February, though the tankan suggests that an upturn may be more moderate than previously thought.
Hirohide Yamaguchi, deputy governor of the central bank, told a parliamentary committee that there had been a positive effect from the stimulus in February, when the central bank set an inflation target of 1 percent and increased its asset-buying program by ¥10 trillion.
“The February easing has had a certain effect on market and business sentiment,” Mr. Yamaguchi said. “But it’s too early to judge the overall impact of the policy.”
Prime Minister Yoshihiko Noda kept up the pressure, telling the same committee he believed the Bank of Japan shared a common understanding with the government on the need to beat deflation.
“I expect the B.O.J., under the goal it has set for itself, continues to make efforts to achieve it and strongly hope it takes appropriate and bold action,” Mr. Noda said.
The central bank has predicted that the economy will emerge from a downturn this year after having been hit in 2011 by an earthquake and tsunami, a nuclear crisis, flooding in Thailand that disrupted supply chains, the yen’s advance to record highs and the euro zone debt crisis.
Its surprise action in February helped knock the yen to 11-month lows, a positive for exporters, but the survey showed that many manufacturers were not convinced that the move would be sustained.
Big manufacturers expect the dollar to average ¥78.14 in the financial year ending next March, the strongest for the yen since comparable data became available in 1996.
The yen, which weakened after the release of the tankan, lost 0.2 percent Monday, falling to ¥82.99 to the dollar.
Highlighting caution about the economic outlook, the survey showed that large companies did not plan to increase capital spending in the financial year that started April 1, missing a market forecast for a 1 percent increase.
However, there was some resilience in private consumption, with the sentiment index for big nonmanufacturing companies rising to plus 5 from plus 4 in December, matching a median market forecast, although the index for June was flat at plus 5.
Bank of Japan policy makers are to meet next Monday and Tuesday, and then April 27, when they will review long-term growth and price forecasts.
Many in the market expect the central bank to ease policy again in the coming months to reinforce its commitment to pull the economy out of deflation.
nytimes.com
The headline index for sentiment among large manufacturers in the closely watched quarterly survey, known as the tankan, was minus 4 in March, unchanged from the reading in December. Readings of less than zero indicate that pessimists outnumber optimists.
The reading, which reflects broad growth trends in Japan and is one of the major policy gauges for the central bank, the Bank of Japan, was worse than the median market forecast of minus 1.
Further, big manufacturers expect conditions to improve only slightly over the next three months, with the June index predicted by survey participants to be at minus 3, compared with a median forecast among analysts of plus 2.
“The tankan result increases the likelihood of additional easing, which I already anticipate, by the Bank of Japan this month, and slightly raises the possibility of additional easing next week rather than on April 27,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
“The B.O.J. could act to signal it is trying even harder to support the economy,” he added, suggesting that the bank could increase a fund for the purchase of bonds and other assets by ¥5 trillion, or $60 billion.
That view is not universal. Others say that as long as the economy is headed for a moderate recovery this year, the situation the Bank of Japan considers most likely, there is no need for extra action to follow the surprisingly aggressive stimulus in February, though the tankan suggests that an upturn may be more moderate than previously thought.
Hirohide Yamaguchi, deputy governor of the central bank, told a parliamentary committee that there had been a positive effect from the stimulus in February, when the central bank set an inflation target of 1 percent and increased its asset-buying program by ¥10 trillion.
“The February easing has had a certain effect on market and business sentiment,” Mr. Yamaguchi said. “But it’s too early to judge the overall impact of the policy.”
Prime Minister Yoshihiko Noda kept up the pressure, telling the same committee he believed the Bank of Japan shared a common understanding with the government on the need to beat deflation.
“I expect the B.O.J., under the goal it has set for itself, continues to make efforts to achieve it and strongly hope it takes appropriate and bold action,” Mr. Noda said.
The central bank has predicted that the economy will emerge from a downturn this year after having been hit in 2011 by an earthquake and tsunami, a nuclear crisis, flooding in Thailand that disrupted supply chains, the yen’s advance to record highs and the euro zone debt crisis.
Its surprise action in February helped knock the yen to 11-month lows, a positive for exporters, but the survey showed that many manufacturers were not convinced that the move would be sustained.
Big manufacturers expect the dollar to average ¥78.14 in the financial year ending next March, the strongest for the yen since comparable data became available in 1996.
The yen, which weakened after the release of the tankan, lost 0.2 percent Monday, falling to ¥82.99 to the dollar.
Highlighting caution about the economic outlook, the survey showed that large companies did not plan to increase capital spending in the financial year that started April 1, missing a market forecast for a 1 percent increase.
However, there was some resilience in private consumption, with the sentiment index for big nonmanufacturing companies rising to plus 5 from plus 4 in December, matching a median market forecast, although the index for June was flat at plus 5.
Bank of Japan policy makers are to meet next Monday and Tuesday, and then April 27, when they will review long-term growth and price forecasts.
Many in the market expect the central bank to ease policy again in the coming months to reinforce its commitment to pull the economy out of deflation.
nytimes.com
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