TOKYO (MNI) – Business confidence among large Japanese
manufacturers was unchanged In March from three months ago, defying
expectations for a rise during the quarter, the results of the Bank of
Japan’s closely watched Tankan corporate sentiment survey released on
Monday showed.

The Tankan survey headline index — showing current business
sentiment among large manufacturers — stood at -4, unchanged from -4 in
December.

The benchmark March figure came in weaker than the MNI survey’s
median of -1, with economists’ forecasts ranging from -6 to +3.

The diffusion index is calculated by subtracting the percentage of
companies reporting deteriorating business conditions from the
percentage of those reporting an improvement. The negative figure
indicates the majority of firms see worse business conditions.

The impact of brighter global growth prospects and the recent rise
in stock prices as well as the pullback of the yen’s rise on corporate
sentiment was limited, clouding somewhat the outlook for an export-led
recovery in Japan.

The Tankan also showed that corporate executives expect their
business sentiment to improve only slightly in the coming three months,
with respondents in the March survey expecting the headline index to
rise to -3 in June.

The Tankan results aren’t consistent with the outcome of a
government survey of business confidence.

The Economy Watchers’ Survey index for Japan’s current climate in
February marked the first rise in two months while the outlook index hit
a near five-year high on eased fears over the yen’s rise hurting a
recovery.

In the government survey, the forward-looking index, which gauges
conditions two to three months ahead, jumped to 50.1 in February from
47.1 in January, posting a second straight monthly rise. The February
level was the highest since 51.9 marked in April 2007.

According to the March Tankan, the average dollar-yen exchange rate
assumed by major manufacturers in their business planning for fiscal
2012 just begun is Y78.14, compared with Y79.02 in the previous survey.

Japanese large non-manufacturing firms remained more confident than
manufacturers. Business confidence among large non-manufacturers
improved for the third consecutive quarter, rising to +5 from +4 three
month earlier.

The index is expected to remain unchanged at +5 in June.

But the sentiment index for small manufacturers worsened to -10
from -8 in December, declining for the first time in three quarters.

This index is expected to worsen further to -15 in June.

The index for smaller non-manufacturers rose to -11 from -14 in
December, up for the third consecutive quarter.

But the index is expected to worsen to -16 in June.

The Tankan also showed that business investment plans by major
manufacturers for fiscal 2012 are expected to rise 3.6% from a year
earlier (the first estimate).

In March, major manufacturers said that they planned to increase
their capital investment by 2.7% in fiscal 2011.

In the latest survey, 10,894 firms, or 98.6%, responded, compared
with 10,846 firms or 98.9%, in the December survey.

The March survey was conducted from February 23 to March 30.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

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