business mood recovery slows, outlook dims: BOJ tankan
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[April 01, 2014]
By Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) — Japanese business
sentiment barely improved in the three months to March and is set to
sour in the following quarter, a closely watched central bank survey
showed, underscoring the challenges facing Prime Minister Shinzo Abe
in his efforts to reflate the economy out of stagnation.
Big firms expect to increase capital spending only modestly, the
BOJ's tankan quarterly survey showed on Tuesday, reflecting
uncertainty over how much a sales tax hike that kicked off on
Tuesday could hurt a fragile economic recovery.
The data will likely keep alive market expectations the BOJ may ease
policy further in coming months if the pain from the tax hike proves
to be much bigger than estimated, analysts say.
The headline index for big manufacturers' sentiment rose by one
point from three months ago to plus 17, the tankan showed, marking
the fifth straight quarter of improvement but slightly short of a
median market forecast of plus 18. The rise was smaller than a
4-point gain in the previous survey in December.
Big service-sector sentiment also improved by 4 points to plus 24,
matching a median market forecast, as consumers rushed to beat the
April sales tax hike.
The tankan's diffusion index (DI) is calculated by subtracting the
number of firms which say business conditions are worse from those
which feel they improved. A positive reading means optimists
But both big manufacturers and non-manufacturers expect conditions
to worsen three months ahead, the tankan showed, as they brace for a
slump in spending after the tax hike that comes even as exports
Big firms expect to increase capital spending by 0.1 percent in the
new financial year starting this month, compared with a median
market forecast for a 0.2 percent rise, the tankan showed. That is a
marked slowdown from a 3.9 percent increase in spending plans for
the fiscal year that ended in March.
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Growth in the world's third-largest economy slowed in the final
quarter of last year as the effect of Abe's reflationary policies
began to fade. Analysts expect the economy to contract in April-June
due to a pullback in consumption after the tax hike, before
returning to moderate growth in following quarters.
A Reuters poll showed analysts expect the BOJ to ease again by July,
despite reassurances by the bank the economy can withstand the tax
hike without further stimulus.
The tank survey will be among data the BOJ board members will
scrutinize when they meet for a rate review next week. The central
bank is widely expected to keep monetary policy steady at the
meeting, preferring to wait at least a few months to evaluate out
the degree of pain from the sales tax hike.
(Additional reporting by Stanley White;
editing by Eric Meijer)
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