They are still believers in the recovery at the high end of Japanese business, which includes many of the companies that buy Australia’s resources in ever rising amounts.
The latest Tankan survey of sentiment of large scale business, conducted by the Bank of Japan improved for the sixth successive quarter and at a faster pace than expected.
But contained in the report was evidence that all is not as rosy as the headline numbers suggest.
First off it was the smallest quarterly rise in 18 months. And the report suggests the December quarter Tankan will see fall the main index fall to a reading of minus 1, from the September reading of 8.
And non-manufacturing companies are slightly more gloomy, seeing their index dipping to minus 2 in December.
Companies are somewhat more circumspect about their future due to the strength of the yen and global economic instability, but the recovery in exports is gradually lifting corporate spending and aiding the nation’s sluggish export-led recovery.
So the headline diffusion index (DI) for big manufacturers’ sentiment rose to 8 in September, up for the sixth straight quarter and the best reading since March 2008.
That beat market forecasts and was well up from the reading of 1 in the June , the survey showed on Wednesday.
The DI in the recording period beat median market expectations of 6. The reading in the previous survey in June stood at just 1.
The figure is derived from the percentage of companies saying business conditions are good minus those saying conditions are bad.
It means that the rise in the yen hasn’t hit current confidence, but it seems to be a major factor about the concerns for the coming quarter or two.
Regarding sentiment among large non-manufacturers, the central bank said confidence improved to 2 in September from a reading of minus 5 in June — far better than economists’ forecast of minus 2.
While a solid report, economists pointed out that the 7 point rise in the index was half the 15 point rise in the June quarter Tankan.
The Tankan was released ahead of more data for August (inflation, unemployment, retail spending and the like) which is due out tomorrow and Friday, at this stage.
Recent economic data point to a tempering rebound in the economy, with growth last quarter slowing to an annual 1.5% rate (which was up from the first estimate for the second quarter of just 0.4%), compared with the 5% annual rate in the March quarter.
Export growth is slowing; the trade surplus fell for the first time in 15 months in August.
A feature of the Tankan was the pessimism among car makers caused by the rise and rise of the Yen.
Car companies expect the sentiment index to decline 38 points in the December quarter, which if it happens, would be the biggest drop for the industry since the central bank started tracking confidence by sector in 1992.
Large companies said they plan to boost their spending by 2.4% in the year ending March 31, 2011, which is another small positive from the survey.
The Tankan was conducted from Aug. 23 to Sept. 28 and surveyed 11,283 businesses.
Around 70% of the responses were collected by September 7, more than a week before the government intervened in currency markets on September 15.
