Japan business mood improves, capex plans strong: BOJ tankan

Daikin Industries employees working on the production line of outdoor air conditioning units.
Daikin Industries employees working on the production line of outdoor air conditioning units.PHOTO: REUTERS

TOKYO (REUTERS) - Confidence at big Japanese manufacturers unexpectedly improved in the second quarter and is seen rising further, a central bank survey showed, offering some relief to policy-makers keen to jump-start an economy appearing to back slide again.

Service-sector sentiment also improved for the third straight quarter, indicating private consumption has finally shaken off the slump after last year's sales tax hike.

Taken together, the readings in Wednesday's Bank of Japan's closely-watched tankan survey appear to back governor Haruhiko Kuroda's view that the economy is on course for a moderate recovery even as growth is expected to slow in the second quarter.

"Machinery makers saw sentiment improve, reflecting firm demand for capital expenditure," said a BOJ official who briefed reporters on the data.

The survey results come on top of a recent batch of mixed data, including an encouraging jump in consumer spending, sluggish exports and weak factory output.

The headline index for big manufacturers' sentiment rose 3 points from three months earlier to plus 15 in June, beating a median market forecast of plus 12 to improve for the first time in three quarters.

It was the highest level since March 2014, when consumption boomed ahead of a sales tax hike in April of that year.

The mood among big service-sector firms improved by 4 points to plus 23 as retailers, hotels and restaurants benefited from a surge in inbound tourism. The median market forecast was for a reading of plus 22.

In an encouraging sign for policy-makers, big firms plan to raise capital expenditure by 9.3 per cent in the fiscal year from April, the survey showed, beating a 5.2 per cent increase expected by analysts.

BOJ policymakers will scrutinise the tankan, regarded as among the most comprehensive gauges of the economy given its large sample base, when they meet for a rate review later this month.

The tankan's sentiment indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.