Japan business turns positive after almost 2 years

AP News
Posted: Jul 01, 2013 2:45 AM
Japan business turns positive after almost 2 years

TOKYO (AP) — Business sentiment among major Japanese manufacturers turned positive for the first time in nearly two years, a signal that companies are reacting positively to the weaker yen and Prime Minister Shinzo Abe's policies to revive the stagnant economy.

The Bank of Japan's closely-watched quarterly "tankan" survey for June showed that the index for major manufacturers rose to positive 4 from negative 8 in March. The survey released Monday was the first to be higher than zero since September 2011. A positive reading means more companies are optimistic than pessimistic.

The index for major non-manufacturers rose to 12 from 6 in the last survey.

The "tankan" also showed that major manufacturers plan to increase capital spending by 6.7 percent in the current fiscal year, while non-manufacturers plan to increase investment by 4.9 percent.

The improved confidence comes amid a weakening yen, which boosts overseas income for Japan's key exporters, and a series of aggressive economic policies — monetary easing and boosting public workers spending — implemented by Abe since he took office in late December.

Japan said Friday that industrial production had risen 2 percent in May from April, the fourth monthly increase, while core consumer prices had stopped falling for the first time in seven months. For years, Japan has been dogged by deflation, or falling prices, which can drag on economic growth, and the Bank of Japan has set a goal of 2 percent inflation within the next two years.

Japan's economy grew at a 4.1 percent annual pace in the first quarter.

The stock market has risen sharply this year, but share prices have fallen back some over the last month amid skepticism about Abe's plans to enact structural reforms in the economy and a belief that prices rose too far too fast.