Japanese Companies’ Confidence At Six-year High. Confidence among Japanese companies has risen to a six-year high, teeing up prime minister Shinzo Abe to push ahead with plans to raise taxes to tackle the government’s huge debt burden. Tuesday’s quarterly “Tankan” survey from the Bank of Japan, which takes the pulse of about 10,600 companies of all sizes across the country, showed that the headline measure of confidence among large enterprises was at its highest level since the final quarter of 2007. Mid and small-sized companies also said conditions had improved to their best levels for almost six years, with particularly strong readings in the business machinery, motor vehicles and construction sectors. The upbeat survey – a key guide for the Bank of Japan when setting monetary policy – is likely to strengthen the conviction of Mr Abe that Japan’s economy is strong enough to withstand the first rise in the rate of consumption tax for 17 years next April. Assisted by aggressive monetary and fiscal stimulus – the first two “arrows” of Mr Abe’s three-pronged assault on deflation – Japan’s economy grew by 4.1 per cent in the first quarter and by 3.8 per cent in the second, more than double the rate of the US. The prime minister had been wavering in recent months, advised by some to hold off from a fiscal squeeze until Japan’s exit from deflation was assured. Core consumer prices rose in August by 0.8 per cent, the highest rate since 2008, but that measure was lifted mostly by the “cost-push” effects of the steep fall in the yen since Mr Abe assumed power last December. Mr Abe is expected to confirm plans to push ahead with a tax hike, as planned, later on Tuesday. Many expect him to offset the impact with a supplementary budget, perhaps of Y5tn ($51bn), along with measures to mobilise more than Y200tn in cash lying on corporate balance sheets. The tightness of the jobs market is seen in the spread between companies saying they have too many people and those saying they are short. That so-called “diffusion index” has sunk to minus 5, the lowest level since the second quarter of 2008, meaning that, on balance, companies are short of employees. The survey also showed that Japanese companies are becoming more comfortable with budgeting on the basis of a weaker yen. Large enterprises are defined as having capital of at least Y1bn, which is 10 times the threshold separating small from medium
Posted on: Tue, 01 Oct 2013 08:41:48 +0000
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