Japan: Business sentiment improves in Q4

According to the Bank of Japan’s quarterly TANKAN business survey, sentiment among large manufacturers jumped to the highest level in a year on the back of a weakening yen. The index rose from 6 in Q3 to 10 in Q4, matching a median market forecast.

Confidence in non-manufacturing industries was unchanged at Q3’s 18 in Q4, which represents the lowest value since Q4 2014.

Despite persistent uncertainties, in particular following the election of Donald Trump in the U.S., the fall of the yen and prospects of a slow but steady pickup in global growth have boosted confidence among large enterprises in the manufacturing sector about the country’s economic outlook. As a result, the forward-looking indicator for the next three months rose from the last quarter’s 6 to 8, which represented the highest level reading since Q3 2015.

Meanwhile, large manufacturers forecast that the Japanese yen will average 103.4 JPY per USD in the second half of the fiscal year 2016 (ending March 2017), which is below the 107.4 JPY per USD forecast in the previous quarter.