Big Japanese manufactures upbeat for first time since September 2011

01 Jul 2013

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Big Japanese manufacturers are upbeat for the first time since September 2011, indicating confidence in prime minister Shinzo Abe's reflationary policies even amid volatility in the stock market.

The quarterly Tankan index for large manufacturers rose to plus four in June from March's minus 8, according to the Bank of Japan.

A positive figure meant optimists outnumbered pessimists. Meanwhile, large companies across all industries had plans to up capital spending 5.5 per cent in this fiscal year, with the government looking to promote business investment.

Japan's economy meanwhile, continues to strengthen, with data last week showing factory output rose the most since December 2011, retail sales increased and core consumer prices ended a six-month slide.

Abe would now try to see the world's third-largest economy move down a sustainable recovery path and spur private sector activity and wage growth.

According to Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo, companies were becoming pretty confident about the economy's outlook.

He added, they still had scope to revise upward their profit forecasts and capital investment plans.

The government was considering various tax reforms for the promotion of capital investment including letting companies claim depreciation in a lump-sum, according to economy minister Akira Amari said to in Tokyo.

Meanwhile, a Bloomberg forecast said, companies on the Nikkei 225 Stock Average would aggregate operating income of 19.7 trillion yen ($198 billion) this fiscal year, up from 16 trillion yen in the year ended March.

Capital spending plans for the current financial year through March 2014 among large companies in the manufacturing and non-manufacturing sectors had seen an upward revision from the March survey.

According to the survey, capital investment had been planned to increase 5.5 per cent.

With Japan carrying out monetary easing, the yen had declined by around 20 per cent against the US dollar since November. With the depreciation of the currency Japanese goods become more competitive abroad improving repatriated revenues.

After becoming prime minister in December last year, Shinzo Abe urged the central bank to initiate ''aggressive'' monetary easing steps to support the economy.

Bank of Japan governor Haruhiko Kuroda has pledged to carry out aggressive monetary easing in a bid to target 2 per cent inflation within about 2 years and pull the economy out of the deflation that has bedeviled the country for over a decade.

According to the government, consumer prices stopped falling in May for the first time in 7 months.

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