BOJ survey shows cheaper yen lifts Japan business sentiment

AP News
Posted: Dec 13, 2016 10:46 PM
BOJ survey shows cheaper yen lifts Japan business sentiment

TOKYO (AP) — Large Japanese manufacturers have gained confidence as the yen has weakened against the U.S. dollar since Donald Trump was elected U.S. president, a quarterly survey by the Bank of Japan showed Wednesday.

The BOJ "tankan" survey for December showed a measure of business sentiment among automakers and other big manufacturing companies climbed to 10 from 6. Though modest, it was the first such improvement in six quarters.

The report comes a day before the Bank of Japan is due to hold its last meeting of the year, where it is expected to leave policy unchanged given hints of improved conditions in the economy, the world's fourth largest.

The tankan index measures the percentage of responding companies that say business conditions are better minus the percentage that say they are worse. So an index level of 10 means slightly more companies are optimistic than pessimistic. Companies can also respond that conditions are unchanged.

It showed the outlook for services companies and other non-manufacturing firms flat at 18. Looking ahead, the outlook index for large manufacturing firms fell to 8, and the outlook for large non-manufacturers fell to 16, reflecting unease over what 2017 will bring, given uncertainties over Trump's future policies on trade, Britain's expected exit from the eurozone and weaker growth in developing countries.

The survey's measures of the mood among smaller companies improved slightly for December, but the outlook for the March survey was still negative for both manufacturers and other companies.

The outlook for sales, profits and investment for both large and small companies also was weaker.

The yen has recently weakened to about 115 yen to the U.S. dollar from near 100 yen. That is a boon for exporters and companies with operations overseas. Profits earned in dollars from those offshore businesses are larger in yen terms when brought back to Japan.

The economy grew at a 1.3 percent pace in July-September, the third straight quarter of expansion but below forecasts by most economists.

Overall, the economy is still growing much more slowly than was hoped given the massive monetary easing of the past few years. The key policy interest rate is negative but corporate investment in factories and hiring remains anemic.

"While the improvement of the sentiment was broad-based in terms of size and sector of firms, the decline of the outlook toward March was also broad-based," Masamichi Adachi of JP Morgan said in a commentary.

The BOJ survey covered 10,791 large, medium and small companies, of which 1,084 were large manufacturers and 1,038 were large non-manufacturers. It was conducted from Nov. 14-Dec. 13.