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Business confidence in Japan improves slightly

 FILE - In this March 18, 2009, file photo employees enter the head office of the Bank of Japan in Tokyo. Japanese companies remain deeply pessimistic...

Japan Economy

FILE - In this March 18, 2009, file photo employees enter the head office of the Bank of Japan in Tokyo. Japanese companies remain deeply pessimistic...

Japanese companies remain deeply pessimistic, but confidence is starting to improve from record lows last quarter, a key central bank survey showed Wednesday.
In the Bank of Japan's quarterly "tankan" survey for June, the closely watched sentiment index for large manufacturers stood at minus 48. Three months ago it hit minus 58 in the sixth straight quarter of decline and the worst reading ever.
The latest reading marks the first uptick in 2 1/2 years but misses an average forecast of minus 43 in a survey of 11 economists by The Associated Press.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable. The lower the number, the greater the pessimism.
The sentiment index for big non-manufacturers rose to minus 29 from minus 31 in March.
Like its Asian neighbors, Japan's economy relies heavily on exports and was hit hard by the unprecedented drop in global demand triggered last year by the financial crisis. The country's biggest corporate names, including Toyota Motor Corp. and Sony Corp., responded by aggressively cutting production, stockpiles and jobs.
Leaner manufacturers are now working on replenishing inventories to meet an uptick in overseas demand. Massive government stimulus spending around the world, particularly in China, is helping fuel sales of cars, equipment and machinery.
Government data Monday showed that industrial output increased 5.9 percent from the previous month, matching a rise in April that marked the biggest jump since March 1953.
Japan's steepest recession since World War II may be easing its grip, but analysts cautioned against getting too excited by the latest results.
The headline figure "is still close to ones in the middle of past recessions," Masamichi Adachi, an economist at JPMorgan Securities Japan, pointed out in a preview report. "The level indicates that the economy is still far below normal."
Indeed, the tankan shows that confidence at small- and medium-size companies barely moved, suggesting that the economy has yet to begin broader recovery. Sentiment among medium-sized manufacturers stood at minus 55 from minus 57, while the mood at small manufacturers was flat at minus 57.
Companies also indicated that they plan to sharply curtail spending. Large manufacturers downgraded their capital spending plans and now expect to cut expenditures by an average 24.3 percent in the fiscal year through March 2010.
Despite cutting thousands of jobs over the last six months, companies in the tankan say they still have too many workers and too much capacity.
Japan's jobless rate jumped to a five-and-a-half-year high of 5.2 percent in May, the government said Tuesday.
The Bank of Japan surveyed a total of 10,319 companies between May 26 and June 30, of which 99 percent responded.
The tankan helps the central bank guide monetary policy, though board members are not expected to change interest rates anytime soon.

Updated : 2021-08-05 19:19 GMT+08:00