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Reuters Tankan indicates business confidence in Japanese economy is improving

Published 03/20/2024, 07:09 PM
Updated 03/20/2024, 07:10 PM
© Reuters. FILE PHOTO: The Japanese national flag waves at the Bank of Japan building in Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/File Photo

By Tetsushi Kajimoto

TOKYO (Reuters) - Confidence at big Japanese companies rebounded to a three-month high in March, and the service-sector mood rose to a seven-month high, a Reuters poll showed, in a sign businesses are growing more optimistic for a recovery in the world's No. 4 economy.

The monthly Reuters Tankan survey, which serves as a key indicator for the Bank of Japan's quarterly tankan survey, due on April 1, comes days after the central bank ditched years of unconventional easing in a shift towards normalising policy.

The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy on Tuesday, making a historic shift away from decades of massive monetary stimulus. But it is expected to keep rates around zero for some time to support fragile growth.

The latest poll canvassed 240 manufacturers and 258 non-manufacturers, of which roughly 237 firms responded during the March 6-15 period. The tankan is among various indicators the BOJ scrutinises in deciding policy steps.

The headline manufacturers' sentiment index stood at plus 10 in March, versus minus 1 in the previous month, reflecting gains in the auto industry, oil refining and chemicals.

As for manufacturers, the Reuters Tankan sentiment index was 2 points lower than three months ago, likely indicating a slight deterioration in the BOJ tankan's manufacturing sector.

Service-sector sentiment rose to plus 32, a seven-month high, led by the retail, wholesale, information, and communications sectors.

The Reuters poll underscored the delicate situation facing the Japanese economy, which narrowly dodged a recession late last year, while the country's key share index recently broke past the bubble-era's high, topping 40,000 for the first time ever.

© Reuters. FILE PHOTO: The Japanese national flag waves at the Bank of Japan building in Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/File Photo

The spectre of a soft landing in a resilient U.S. economy, the world's largest, and a bottoming out of the Chinese economy could provide some comfort for trade-reliant Japan's economy.

Major Japanese firms last week offered average 5.28% wage hikes this year, the largest pay raise in 33 years, the country's largest trade union group Rengo said, helping pave the way for the BOJ to make its historic policy shift in the hopes that it would spur stronger household spending.

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