Japan: Business sentiment improves in Q1; prospects deteriorate sharply
April 1, 2014
According to the Bank of Japan's quarterly TANKAN business survey, sentiment among large manufacturers jumped to its highest level since Q4 2007. The index rose from 16 points in Q4 to 17 points in Q1, which was below the 19 points markets had expected. A positive reading means that optimists outnumber pessimists.
Confidence in non-manufacturing industries improved further in Q1, increasing from 20 points in Q4 to 24 points in Q1. As a result, the index now sits at the highest level since 1991.
Despite these improvements, large enterprises in the manufacturing sector expect that conditions will deteriorate in the next three months. Businesses' worsening mood mostly reflects concerns about the impact of a sales tax hike introduced in April and increasing skepticism regarding Prime Minister Shinzo Abe's ability to rekindle the country's economy. The forward-looking forecast index fell to 8 points in Q1 (Q4: +14 points), which represents the lowest level in a year. Meanwhile, large manufacturers forecast that the Japanese yen will trade at 99.6 JPY per USD by the end of the fiscal year 2014 (ending March 2015).