Japan business confidence soars
By CNN's Geoff Hiscock, Asia Business Editor
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Strong exports are underpinning growth in Japan's economy.
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(CNN) -- A key survey of business sentiment in the world's No. 2 economy, Japan, shows confidence among big manufacturers soaring to its highest level in more than three years.
The Bank of Japan's closely watched tankan survey, released Friday, found sentiment for large manufacturers was plus 11 in December, up from plus one in September.
That was much better than analysts' expectations of plus six. The last time positive sentiment reached double figures was in December 2000, when it was 10. It was also 10 in September 2000.
For large non-manufacturers, sentiment in December improved to minus nine from minus 13.
The result of the survey, taken between November 10 and December 11, adds to recent data showing Japan's economy is on the improve, on the back of increased demand from the United States and China, two big importers of Japanese goods.
According to the latest figures from the government, the economy is growing at an annualized rate of about 2.2 percent.
ING's Tokyo-based chief economist Richard Jerram told CNN Friday the tankan figures showed a broad-based improvement right through the economy.
But he said Japan still lacked a "strong domestic dynamic for growth" and so was still overly reliant on exports.
"What is missing is a healthy financial system, allocating credit properly," he said.
He said the health of big banks was improving, but a proper lending market for businesses remained the "missing link".
Jerram said he did not see the weaker dollar -- which at 108 yen is near three-year lows -- as a big threat to export growth, arguing that variations of this level were quite normal in the dollar-yen exchange rate cycle.
Respondents to the tankan survey are predicting an average dollar rate of 111.40 yen for the six months to March 2004.
In a research note ahead of the tankan's release, Barclays Capital Japan chief economist Mamoru Yamazaki said the economy remained on a recovery path, and he was now forecasting real GDP growth of more than 2 percent for 2004.
The Bank of Japan's tankan index measures business sentiment by comparing the percentage of companies reporting unfavorable conditions from those that say they are favorable.
The tankan surveys more than 8200 large, medium and small enterprises on their views of the economy, including their spending and hiring plans. The outlook among large manufacturers for March 2004 is plus eight, while for non-manufacturers it is minus seven.
Tokyo's share market is responding positively to the tankan result, with the Nikkei up about 1.3 percent in morning trade. Consumer electronics leader Sony is up 2 percent, while other big exporters including Canon, Toyota, Honda and Nissan are also up strongly.
