Japan survey shows improved business sentiment

[October 01, 2013]  TOKYO (AP) -- Japanese manufacturers are increasingly optimistic over the business outlook in months ahead, according to a survey released Tuesday in advance of the expected approval of a sales tax increase.

Results from the Bank of Japan's "tankan" quarterly survey showed large manufacturers were especially upbeat, with a reading of positive 12, up from 4 in the July survey.

Prime Minister Shinzo Abe was waiting for the survey's release to go ahead with a long-anticipated decision on increasing the sales tax next year to 8 percent from the current 5 percent.

He was expected later in the day to announce the Cabinet's approval of that plan, along with tax breaks and other stimulus meant to counter the dampening effect on consumer demand that is expected to follow the tax hike's implementation next April.

The tankan's results contrast with data for August showing higher unemployment and lower household spending. Improved hiring and wages are needed to spur a rebound in consumer spending to help underpin a sustained recovery after years of stagnation.

Lower readings imply more pessimism. The tankan showed sentiment of all enterprises improved to 2 from previous survey's minus 2. But the sentiment for all large enterprises remained at minus 2. For small manufacturers, the index was at minus 9, up from minus 14.

Since taking office late last year, Abe has sought to jar the economy out of the doldrums with a combination of ultra-easy monetary policy and hefty government spending. He has also promised to promote reforms, such as deregulation of some sectors, meant to boost Japan's longer-term competitiveness -- most of which have yet to be enacted.

The economy grew 3.8 percent in April-June after recovering from recession late last year. But it is expected to slow as boosts to public spending announced earlier in the year wind down. Economists expect a boost from "front-loading" of purchases by businesses and individuals ahead of the tax hike. But they also anticipate a blow to growth from higher prices and taxes over the next few years.

[Associated Press]

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