Japan business confidence improves

Big Japanese firms grew more confident about business conditions in the current quarter, a government survey showed on Thursday, but softer capital spending plans dimmed the outlook for the economy. The improved business sentiment baffled economists who had expected that global market turmoil, which has boosted the yen and hurt share prices, would take its toll on businesses.

But analysts stuck to the view that the more closely watched tankan survey by the Bank of Japan, due out on Oct. 1, would show a slight worsening in business sentiment, keeping the hurdle high for the central bank to raise interest rates. “The survey shows an improvement in business sentiment, but it’s a bit puzzling as it was conducted on Aug. 25, when we had a rise in the yen, a fall in share prices and political uncertainty,” said Naoki Iizuka, a senior economist at Mizuho Securities.

The business survey index (BSI) on sentiment at large manufacturers stood at plus 7.7 for the July-September quarter compared with minus 2.2 in April-June. The rise also contrasted with the Reuters Tankan, a monthly survey of leading companies designed to track the BOJ tankan. The Reuters Tankan survey found that manufacturer sentiment hit a two-year low in September. The BOJ kept its key interest rate on hold at 0.5 percent on Wednesday, but said rates could not stay so low forever.

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