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Japan's big manufacturers see sentiment worsen in Sept. as exports, output remain stifled

Xinhua, October 1, 2015 Adjust font size:

Sentiment at Japan's big manufacturers worsened in September from three months earlier although going ahead firms are looking to boost investments, the Bank of Japan's (BOJ) Tankan survey showed Thursday.

The diffusion index for large manufacturers, including automakers and the country's electronic producing behemoths, dropped 3 points to a reading of 12, marking the first decline in three quarters, with the latest reading coming in below median analysts' expectations, the survey showed.

But along with service-sector sentiment improving in the recording period, according to the bank, large manufacturers maintained robust capital expenditure plans as healthy profits have been booked recently, with the survey showing they plan to boost spending by an average of 10.9 percent this fiscal year through next March, up from a revised 9.4 percent increase in June.

"Capital expenditure plans remain relatively firm and we have yet to hear of firms say they plan to significantly reduce or scrap spending plans in Japan," a Bank of Japan official was quoted as telling a press briefing following the survey's release.

The index for non-manufacturers, which comprises firms in both construction and retail-related businesses, rose 2 points to plus 25, beating median analysts' expectations, with the rise being attributed to robust office demand, falling energy costs and surging numbers of high-spending tourists from East Asia, according to the bank's officials.

Economists are of the opinion that the mixed figures in the latest Tankan survey reflect a stall in growth in Japan's economy, along with other recent macroeconomic data that has come in below par and could put pressure on the central bank to adjust its interest rate policy in the near future, as it continues to chase its 2 percent inflation goal, against a backdrop of slumping exports, falling factory output and skittish consumer demand, exacerbated by slowing growth and demand in emerging Asian economies.

Following an economic contraction in the April-June quarter, economists have also said that looking ahead, another contraction in Q3 was a high possibility, and if not, a rebound would be soft and do little to inspire markets as the bank's inflation gauge continues to hover at around zero.

The BOJ's quarterly Tanken survey is regarded by economists as Japan's most closely watched gauge of business sentiment and the current diffusion indexes reveals the percentage of companies reporting unfavorable business conditions outweigh those reporting favorable environments, and highlights the struggles both the BOJ itself as well as Prime Minister Shinzo Abe are facing, with Abe firmly in the spotlight after launching his "Abenomics" 2.0 economic policy push in a further bid to lift the world's third- largest economy out of its doldrums. Endi