TOKYO (MNI) – The closely watched Bank of Japan corporate sentiment
survey released on Monday showed business confidence among large
manufacturers improved in September from three months ago for the first
time in two quarters.

The Tankan survey headline index – showing current business
sentiment among large manufacturers – improved to +2 in September from
-9 in June.

The benchmark September figure came in slightly weaker than the MNI
survey’s median of +3, with economists’ forecasts ranging from 7 to -1.

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

The improvement of the leading figure in the September Tankan
reflected the V-shaped recovery of production and exports in the wake of
easing supply-side constraints.

Production and exports have almost recovered to the pre-quake

Corporate executives expect their business sentiment to continue
improving for three months ahead but its pace will be slow amid heighted
uncertainty over overseas demand and concern over the sovereign debt
woes in Europe as well as the strong yen.

In the latest survey respondents expected the index to improve to
+4 in December.

Japan’s economy has been recovering smoothly after the temporary
downturn caused by the March 11 disasters.

But heightened concern over the outlook for business conditions on
the back of the strong yen and concern over the global economy are
casting a shadow over future businesses.

The assumed dollar-yen exchange rate expected by major
manufacturers this fiscal year is Y81.15, according to the September
Tankan, compared with an average Y82.59 at the previous survey.

The dollar traded at around Y77.20 Monday in Tokyo.

In the September survey, sentiment among exporters – including
automakers, electronics firms and business machinery makers – improved
from three months ago.

Large carmakers, whose sentiment improved sharply to +13 in
September from -52 in June, foresaw their index improving 11 points to
+24 in December.

Sentiment among large electric machinery makers rose to -5 in the
latest survey from -16 in the previous one but they predicted it would
improve to -4 in three months’ time.

Sentiment of nonferrous metals rose to +17 in September from -14
and the index is expected to improve to +28 in December.

The Tankan also continued to show a gap in sentiment between
export-oriented manufacturers and other sectors dependent on domestic

Business confidence among large non-manufacturers improved for the
first time in two quarters, rising to +1 from -5 three months earlier.

But the index is expected to be flat at +1 in December.

The June figure for large non-manufacturers was slightly weaker
than most analysts had expected. The MNI median of forecasts by
economists was +2, with estimates ranging from +8 to -1.

The sentiment index in small manufacturers improved to -11 from -21
in June, up for the first time in two quarters.

The index is expected to worsen to -12 in December.

The improving in sentiment among smaller manufacturers was led by
motor vehicles, iron and steel, lumber and wood products, processed
metals, nonferrous metals as well as electrical machinery.

The index for smaller non-manufacturers rose to -19 from -26 in
March, up for the first in two quarters.

But the index is expected to worsen to -22 in December amid ongoing
uncertainty over domestic demand amid severe labor and income
conditions, and hollowing out of industry.

At the latest survey, 10,910 firms, or 98.8%, responded, compared
with 10,997 firms, or 98.2%, in the June survey.

The September survey was conducted from August 29 to September 30.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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