Doubts about a rebound in Japan's economy are rippling through boardrooms across the country, a key central bank survey suggests, as efforts to revive growth falter.
The Bank of Japan's closely watched Tankan report shows confidence among big manufacturers stood at plus 12 in March, flat from the previous survey and missing expectations that the level would come in at 14.
While sentiment among non-manufacturers was more upbeat, they pared profit expectations while Japan's increasingly pessimistic corporate titans trim their spending plans.
The survey of more than 10,000 companies -- which shows the difference between the percentage of firms that are optimistic and those that see conditions as unfavourable -- is the most comprehensive indicator of how Japan Inc. is faring. Tokyo's benchmark Nikkei 225 index fell 0.89 per cent morning trade as investors reacted to the downbeat report."
A weak yen and lower oil prices has provided some support (to the economy) but the Tankan showed that firms, particularly manufacturers, are now acutely aware that overseas demand is softening," SMBC Nikko Securities said in a report.
The tepid survey comes days after separate data showed output from Japanese factories shrank by a worse-than-expected 3.4 per cent in February, while inflation stalled as a key measure of prices was flat for the first time in nearly two years.
"Japanese companies aren't convinced the economy is going to get stronger," said Atsushi Takeda, an economist at Itochu Corp.
"Without an improvement in business confidence, it's hard to imagine Japan will achieve a full-fledged recovery."
The gloomy data highlight the challenges facing Prime Minister Shinzo Abe's two-year-old bid to conquer deflation and revive the long-sluggish economy, dubbed Abenomics -- and they stand in stark contrast to Tokyo's relatively rosy assessment of Japan's prospects.
While a weak yen has lifted profits among Japanese exporters, it also jacks up companies' import costs and analysts have warned that the benefits of a cheap currency were fading as firms get set to report their quarterly results later in April.
"A stall in forex rates and a bottoming out of oil prices would slam the brakes on firms' profit momentum," the SMBC Nikko report said. "Abenomics could face its moment of truth in the second half of this year."
Abe's three-pronged plan consists of big government spending, a massive Bank of Japan (BoJ) monetary easing scheme, and a pledge to overhaul the highly regulated economy.
While the scheme initially helped weaken the yen and stoked a stock market rally, it ran into trouble in 2014 when Tokyo raised sales taxes to pay down Japan's enormous national debt -- one of the heaviest burdens among wealthy nations.
Consumer spending dived after millions splashed out their yen on big-ticket items such as cars and appliances before the rise, pushing the economy into contraction.
Japan limped back with a 0.4 per cent expansion in 2014's last quarter, but the tepid data since and Wednesday's Tankan report are expected to push the BoJ into unleashing more stimulus later in 2015.
"The BoJ could have been comfortable taking no action for a while had these numbers shown clear improvement. But now they'll have to check more data to gauge the strength of the economy," said Hideo Kumano, an economist at Dai-ichi Life Research Institute.
As doubts grow about his battle to revive Japan's economy, Abe has called on firms to reach into their enormous cash piles to lift wages, a move he hopes will stimulate spending and drive prices higher.
While Japan's economy remains "sluggish", the Tankan report offered modest signs for a pick-up, said Marcel Thieliant at Capital Economics. "Respondents are reporting capacity shortages," he said in a commentary. "This suggests that they will start to ramp up capital expenditure soon."
au.finance.yahoo.com
The Bank of Japan's closely watched Tankan report shows confidence among big manufacturers stood at plus 12 in March, flat from the previous survey and missing expectations that the level would come in at 14.
While sentiment among non-manufacturers was more upbeat, they pared profit expectations while Japan's increasingly pessimistic corporate titans trim their spending plans.
The survey of more than 10,000 companies -- which shows the difference between the percentage of firms that are optimistic and those that see conditions as unfavourable -- is the most comprehensive indicator of how Japan Inc. is faring. Tokyo's benchmark Nikkei 225 index fell 0.89 per cent morning trade as investors reacted to the downbeat report."
A weak yen and lower oil prices has provided some support (to the economy) but the Tankan showed that firms, particularly manufacturers, are now acutely aware that overseas demand is softening," SMBC Nikko Securities said in a report.
The tepid survey comes days after separate data showed output from Japanese factories shrank by a worse-than-expected 3.4 per cent in February, while inflation stalled as a key measure of prices was flat for the first time in nearly two years.
"Japanese companies aren't convinced the economy is going to get stronger," said Atsushi Takeda, an economist at Itochu Corp.
"Without an improvement in business confidence, it's hard to imagine Japan will achieve a full-fledged recovery."
The gloomy data highlight the challenges facing Prime Minister Shinzo Abe's two-year-old bid to conquer deflation and revive the long-sluggish economy, dubbed Abenomics -- and they stand in stark contrast to Tokyo's relatively rosy assessment of Japan's prospects.
While a weak yen has lifted profits among Japanese exporters, it also jacks up companies' import costs and analysts have warned that the benefits of a cheap currency were fading as firms get set to report their quarterly results later in April.
"A stall in forex rates and a bottoming out of oil prices would slam the brakes on firms' profit momentum," the SMBC Nikko report said. "Abenomics could face its moment of truth in the second half of this year."
Abe's three-pronged plan consists of big government spending, a massive Bank of Japan (BoJ) monetary easing scheme, and a pledge to overhaul the highly regulated economy.
While the scheme initially helped weaken the yen and stoked a stock market rally, it ran into trouble in 2014 when Tokyo raised sales taxes to pay down Japan's enormous national debt -- one of the heaviest burdens among wealthy nations.
Consumer spending dived after millions splashed out their yen on big-ticket items such as cars and appliances before the rise, pushing the economy into contraction.
Japan limped back with a 0.4 per cent expansion in 2014's last quarter, but the tepid data since and Wednesday's Tankan report are expected to push the BoJ into unleashing more stimulus later in 2015.
"The BoJ could have been comfortable taking no action for a while had these numbers shown clear improvement. But now they'll have to check more data to gauge the strength of the economy," said Hideo Kumano, an economist at Dai-ichi Life Research Institute.
As doubts grow about his battle to revive Japan's economy, Abe has called on firms to reach into their enormous cash piles to lift wages, a move he hopes will stimulate spending and drive prices higher.
While Japan's economy remains "sluggish", the Tankan report offered modest signs for a pick-up, said Marcel Thieliant at Capital Economics. "Respondents are reporting capacity shortages," he said in a commentary. "This suggests that they will start to ramp up capital expenditure soon."
au.finance.yahoo.com
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