TOKYO • Confidence in Japan's economy held up unexpectedly among large manufacturers in the past few months, suggesting that record corporate profits are compensating for uncertainty about the effects of an expected United States interest rate hike and the slowdown in China.
The Tankan index of confidence among big manufacturers was unchanged at 12 this month, the Bank of Japan said yesterday.
The index is forecast to fall to seven in March.
A positive number means there are more optimists than pessimists among manufacturers.
The data is the latest in a string of optimistic reports on Japan's economic growth and capital spending, supporting a view that additional monetary stimulus will not be imminent.
Bank of Japan governor Haruhiko Kuroda is counting on firms to boost investment and wages to stimulate the economy as the central bank's main price gauge has been falling since August.
Mr Yasuhiro Takahashi, an economist at Nomura Securities in Tokyo, said: "The Tankan survey showed that corporate confidence is solid. The capital spending figure also confirmed that companies maintain a bullish stance on their spending plans. The results also support the case for no additional easing, for the time being."
The question is whether the stronger sentiment will spur companies to expand capital investment and raise wages. Economists say firms are waiting to see the effects of the anticipated Fed rate increase and the slowdown in China, Japan's largest trading partner.
HSBC Holdings economist Izumi Devalier said on Bloomberg Television: "The deterioration, especially in manufacturers' outlook, is a bit concerning. That reflects concerns over the global economic outlook... in China and emerging Asian markets."
The Federal Open Market Committee will hold its last meeting of the year today and tomorrow and is widely expected to raise the United States benchmark federal funds rate.
Overseas sales are a bright spot for Japanese companies, compensating for lacklustre demand at home. Large manufacturers forecast that domestic sales would drop this fiscal year and exports will climb.