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Tankan: Japan business sentiment sees sharp improvement Tankan: Japan business sentiment sees sharp improvement
(35 minutes later)
Japanese manufacturers' sentiment has improved sharply, the Bank of Japan's closely-watched Tankan survey suggests.Japanese manufacturers' sentiment has improved sharply, the Bank of Japan's closely-watched Tankan survey suggests.
The big manufacturers' index rose to plus 12 in the July-to-September quarter, from plus 4 in the previous three months.The big manufacturers' index rose to plus 12 in the July-to-September quarter, from plus 4 in the previous three months.
Manufacturers also plan to increase their spending in the current financial year, which should help boost growth.Manufacturers also plan to increase their spending in the current financial year, which should help boost growth.
The improvement comes amid signs of a recovery in the Japanese economy after years of stagnant growth.The improvement comes amid signs of a recovery in the Japanese economy after years of stagnant growth.
"Japan's economy is on track, and the tankan has shown broad-based improvement in sentiment," said Yasuo Yamamoto, a senior economist with Mizuho Research Institute in Tokyo."Japan's economy is on track, and the tankan has shown broad-based improvement in sentiment," said Yasuo Yamamoto, a senior economist with Mizuho Research Institute in Tokyo.
"Manufacturers had been lagging the overall economy, but the tankan shows improvements in this sector are starting to catch up due to exports and a weak yen.""Manufacturers had been lagging the overall economy, but the tankan shows improvements in this sector are starting to catch up due to exports and a weak yen."
The sentiment indexes are calculated by subtracting the percentage of respondents who say business conditions are poor from those who say they are good.The sentiment indexes are calculated by subtracting the percentage of respondents who say business conditions are poor from those who say they are good.
A positive reading means optimists outnumber pessimists.A positive reading means optimists outnumber pessimists.
Abenomics boostAbenomics boost
Prime Minister Shinzo Abe, who came to power in December last year, has unveiled a series of aggressive policy measures aimed at reviving Japan's economy.Prime Minister Shinzo Abe, who came to power in December last year, has unveiled a series of aggressive policy measures aimed at reviving Japan's economy.
His moves, which have come to be known as Abenomics, have started to have some impact on Japan's growth.His moves, which have come to be known as Abenomics, have started to have some impact on Japan's growth.
At the same time, Japan's central bank, the Bank of Japan, has also taken some steps - including setting a 2% inflation target and doubling the country's money supply - to help boost growth.At the same time, Japan's central bank, the Bank of Japan, has also taken some steps - including setting a 2% inflation target and doubling the country's money supply - to help boost growth.
These measures have resulted in a sharp decline in the yen's value. The Japanese currency has fallen nearly 25% against the US dollar since November last year.These measures have resulted in a sharp decline in the yen's value. The Japanese currency has fallen nearly 25% against the US dollar since November last year.
A weak yen bodes well for Japan's large manufacturers, who rely heavily on exports for their growth, as it makes their good more affordable for foreign buyers.A weak yen bodes well for Japan's large manufacturers, who rely heavily on exports for their growth, as it makes their good more affordable for foreign buyers.
It also helps boost their profits when they repatriate their foreign earnings back home. Many leading Japanese firms have reported an improvement in profits recently.It also helps boost their profits when they repatriate their foreign earnings back home. Many leading Japanese firms have reported an improvement in profits recently.
Analysts said that an improvement in earnings, coupled with the signs of a recovery in the Japanese economy, had helped boost morale.Analysts said that an improvement in earnings, coupled with the signs of a recovery in the Japanese economy, had helped boost morale.
"Earnings recovery on the back of a weaker yen, which affected only limited sectors at the time of the previous survey, has spread to a wider part of industry," said Yoshimasa Maruyama, chief economist with Itochu Economic Research Institute in Tokyo."Earnings recovery on the back of a weaker yen, which affected only limited sectors at the time of the previous survey, has spread to a wider part of industry," said Yoshimasa Maruyama, chief economist with Itochu Economic Research Institute in Tokyo.
Higher sales tax?
The latest survey comes as Mr Abe is set to take a decision on raising the rate of sales tax in the country.
The rate currently stands at 5% and under government plans it could double to 10% by 2015.
Policymakers have argued that they need to do so to improve the country's finances and reduce its public debt - which now stands as around 230% of its gross domestic product (GDP).
But there have been some concerns that a tax rate hike may hurt domestic consumption and hamper the ongoing recovery.
However, analysts said that data released over the past few weeks - which showed signs of an improvement in the economy - coupled with the latest Tankan survey results, should see the government go ahead with the planned hike.
Last month, Japan revised up its growth data for the April to June quarter.
Meanwhile, data released last week showed that consumer prices have started to rise, although stoked mainly by higher fuel costs.
"The tankan confirmed the view that Prime Minister Abe will decide to hike the sales tax from next April," said Naoki Iizuka, economist with Citigroup Global Markets Japan.
"It's hard to find reasons for putting it off."