Instant View: Japan third quarter big manufacturers' mood improves - BOJ tankan

Reuters

TOKYO (Reuters) - Japanese big manufacturers' sentiment improved in the three months to September for a third straight quarter, the central bank's "tankan" survey showed, cementing the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year.

COMMENTARY:

YOSHIMASA MARUYAMA, CHIEF ECONOMIST, ITOCHU ECONOMIC RESEARCH INSTITUTE, TOKYO

"Earnings recovery on the back of a weaker yen, which affected only limited sectors at the time of the previous survey, has spread to a wider part of industry.

"Big manufacturers' outlook is a little bit weaker. But it's only natural for them to take a conservative view on their future performance given uncertainty in overseas economies.

"The data shows Japan's economic recovery is intact and that we can expect strong growth in fiscal 2013 (to March 2014). Prices are rising for more items than before - items for which companies had previously thought they could not raise prices, showing corporate sentiment is changing.

"Changes in their inflation expectations like this are a prerequisite for exiting deflation and the Bank of Japan's target to hit 2 percent inflation. So we can say positive signs are emerging here and there.

"This supports a sales tax increase. But the goal should not be raising the tax but implementing fiscal discipline. Steps are set to be taken on the revenue side. The next question is what should be done on the expenditure side."

NAOKI IIZUKA, ECONOMIST, CITIGROUP GLOBAL MARKETS JAPAN, TOKYO

"The tankan headline figure came out stronger than expected and it suggests big firms are not pessimistic about the outlook. The better-than-expected sentiment probably reflected improved earnings with actual yen rates undershooting their estimates.

"There's a gap between improving sentiment and the state of the real economy, which slowed down somewhat in July-August as shown by recent indicators such as exports, factory output and consumption.

"Still, the tankan confirmed the view that Prime Minister Abe will decide to hike the sales tax from next April. It's hard to find reasons for putting it off."

AYAKO SERA, MARKET ECONOMIST, SUMITOMO TRUST AND BANKING, TOKYO

"The reading for manufacturers was quite strong, while the reading for non-manufacturers was in line with expectations, so the results can be said to be mixed. Also, the outlook for capital spending was weaker than expected."

"Overall, though, it seems that the increase in the consumption tax is already decided, and the tankan results did not contain anything to alter this decision."

MASAMICHI ADACHI, SENIOR ECONOMIST, JPMORGAN, TOKYO

"As you know, the headline numbers are probably a bit better than expected and the details are still constructive.

"We see some signs of cautiousness, like a slight downward revision in the capex plan and so on.

"Still, as a whole, the assessment on excess capacity or a shortage of labor suggests the output gap is getting smaller.

"This is very constructive in terms of the assessment of the current economic situation. There is no reason that Prime Minister Abe should stop raising the (sales) tax."

YASUO YAMAMOTO, SENIOR ECONOMIST, MIZUHO RESEARCH INSTITUTE, TOKYO

"Japan's economy is on track, and the tankan has shown broad-based improvement in sentiment.

"Manufacturers had been lagging the overall economy, but the tankan shows improvements in this sector are starting to catch up due to exports and a weak yen.

"The government can go ahead and raise the sales tax as the economy is clearly recovering."

LINK:

For full table, click on the BOJ's website:

http://www.boj.or.jp/en/statistics/tk/gaiyo/2011/tka1309.pdf

(Reporting by Leika Kihara, Kiyoshi Takenaka, Tetsushi Kajimoto, Lisa Twaronite, Dominic Lau and Stanley White; Editing by Chris Gallagher and Edmund Klamann)

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