Japan ups assessment on business mood, thanks to upbeat profits

JAPAN’S government upgraded its view on business sentiment for the first time in two months in December as a central bank survey showed broad recovery in the corporate mood thanks to upbeat profits.

But the Cabinet Office, in a report on Tuesday (Dec 19), left the overall economic assessment unchanged for the month, saying the economy, the world’s third largest, was “recovering moderately, although some areas stalled recently”.

“Business sentiment is improving,” said the report, upgrading its previous assessment that it was improving moderately as a whole.

The latest report reflected the Bank of Japan’s survey last week which showed business confidence at big Japanese manufacturers hit a near two-year high in the three months to December. Big non-manufacturers’ sentiment also improved to levels not seen since 1991.

“Business mood is improving, and corporate profits are also improving, but these have not spilled over to domestic demand such as consumption and investment to raise the overall economic view,” said an official at the Cabinet Office.

The government retained its view on consumer spending that it was “picking up” for December, sticking to wording it has used since May. Wage growth has not kept pace with inflation while spending on travel and dining out was recovering, the report said. The government reiterated that the recovery in capital investment appeared to have stalled, while industrial production showed signs of picking up.

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The pace of increase in consumer prices has been moderate recently, the report added, tweaking the wording from last month when it said that consumer prices were rising.

The latest report came after data showed Japan’s economy shrank faster than initially estimated in the third quarter as the household sector faced growing headwinds.

Global monetary tightening and concerns over the Chinese economy could be downside risks to Japan’s economy, and the government will continue to closely monitor factors such as the Middle East crisis and market volatility, the report noted.