Bank of Japan survey shows stable business conditions, but bleaker outlook

TOKYO -- A Japanese central bank survey shows sentiment among big manufacturers is steady, though companies in all sectors expect conditions to deteriorate in the coming months.

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The Bank of Japan's "tankan" survey, released Monday, remained at 12 as of December, unchanged from September. The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive.

The reading for non-manufacturers was 25, also unchanged from September, the survey said. However the number of companies anticipating worse conditions in the coming quarter outnumbered those expecting improvements, with figures of minus 5 for manufacturers and minus 7 for non-manufacturers.

A total of 10,971 companies responded to the survey.

The survey for the coming quarter showed both manufacturers and other companies were pessimistic about the outlook for sales and for investment in the world's third-largest economy.

Japanese companies have seen their profits soar since Prime Minister Shinzo Abe took office three years ago and initiated a recovery strategy that relies heavily on monetary stimulus. But investment and wages have lagged expectations, slowing growth.

A recent upward revision of data showed Japan's economy steered clear of recession, despite a contraction in April-June, as the economy gathered momentum in July-September.

"Admittedly, firms project a sharp weakening in business conditions in the coming quarter, but this is not unusual when current circumstances are as buoyant as they are now," Marcel Thieliant of Capital Economics said in a research note.

While stronger demand for exports helped, a build-up in inventories also contributed to the uptick in growth. That would be a plus if consumer demand rises to meet the increased output.

However, the tankan survey shows firms judging supplies of goods exceeding demand in almost all categories, despite very tight capacity and labour supplies.



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