Japan's Tankan confidence rebounds less than expected

An index of confidence among large makers of electronics, cars and other products climbed to minus 48 from a record minus 58 in March, the Bank of Japan's Tankan survey showed Wednesday in Tokyo. Economists surveyed by Bloomberg News predicted minus 43. A negative number means pessimists still outnumber optimists.

Big companies surveyed plan to cut spending at a faster rate than they predicted three months ago as profits decline and factories lie idle amid a weak revival of global demand. The report provides the latest indication that Japan's likely expansion last quarter was short lived after figures over the past week showed a revival in industrial production may wane, job prospects worsened and deflation returned.

“The improvement is good news but this Tankan makes me very skeptical about the sustainability of the recovery,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, who correctly forecast the survey result. “Japan's economy may start to deteriorate after the third quarter because demand hasn't rebounded.” The yen traded at 96.82 per dollar at 11:42 a.m. in Tokyo from 96.27 before the report. The benchmark Topix index of shares rose 0.1 percent. The gauge climbed 20 percent last quarter, its biggest gain in more than two decades. Reports since Tuesday provide a mixed picture of a global economy that's struggling to emerge from the worst recession since the Great Depression. U.S. consumer confidence fell in June and the U.K. economy shrank the most since 1958 in the first quarter. In contrast, Chinese manufacturing expanded for a fourth month in June and South Korean exports fell the least in eight months.

Even with the improvement in Tankan sentiment, the first in more than two years, large manufacturers and service companies remain more pessimistic than they were at any time during the previous recession, which ended in 2002.

Confidence at big non-manufacturers rose to minus 29 points from minus 31. Large manufacturers and service companies both expect to be less gloomy in September.

Large businesses plan to slash capital spending by 9.4 percent in the current business year, more than the 6.6 percent predicted three months ago and the worst-ever projection for a June Tankan. They said profits will tumble 19.8 percent, more than the 11 percent predicted in March, the report showed.

Exports and output have fallen by about a third from last year's levels. While production has increased month-on-month since March, manufacturers plan to slow the pace of gains in June and July, the Trade Ministry said this week.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos Respond to this email