Friday, December 20, 2013

Japanese Business Sentiments Appear Bullish

The Bank of Japan conducts a quarterly business confidence poll called the “Tankan Survey” which sheds light on the status of the Japanese economy. The Bank declared recently that this is the first time in almost two years that the Tankan Survey has exhibited some positive signs.

The big manufacturers' index also registered a sharp growth between April and June and ascended to plus 4. This is a big change from the previous quarter when it was minus 8. These are positive signs that are reaffirming the faith of businessmen in the Japanese economy.

According to the survey, the large Japanese manufacturers are now doing their bit to boost the economy. If the reports are to be believed, large Japanese manufacturers are planning to expand their capital spending in the present financial year and pump money into the system. Financial analysts believe that this will most likely impact the economy in a positive way.

The Japanese government has also been making visible efforts to stimulate the economy. They have adopted an aggressive monetary policy to boost the economy. The government has recently released a fiscal stimulus to push Japan's stagnant economy. Market analysts and observers who have been keeping their eyes fixed on the Japanese economy say that the Prime Minister Shinzo Abe's 'Abenomics' is finally beginning to show some concrete results. However, it is too soon to draw firm conclusions.

James Summer, Global Co-Chief Operating Officer of Equities with Tokyo’s Acom Alliance, says," The Tankan survey affirms the fact the business sentiments are turning positive in Japan. The decline in the value of Yen and a steady economic recovery has won over the faith of Japanese manufacturers. They look unaffected by the more recent market turbulence and are willing to invest in the economy."

He further added," Japan is also showing more positive signs. The industrial output has gone up. Even if only mediocre, the net exports are also showing growth. With the imminent tax hike, people will buy and hoard things which will lead to an increase in public consumption. And alongside all of this, public works are expected to grow as well. These economic signs combined with the positive results that the 'Abenomics' has yielded, has reaffirmed the faith of Japanese firms in their economy. 

If Japanese businesses increase their investments, the Japanese economy will come back on the right track sooner rather than later."

Yen has been supportive
Among the various measures that the Japanese government took to pull the economy out of deflation, one was doubling the inflation target. The Central Bank of Japan aims to achieve 2% inflation. This may seem a little too ambitious, but given the present scenario, it is certainly the right step to take.

The economic crisis in Japan has prevailed for over two decades now In fact, the country was struggling badly before Abe's term. Not only has Japan been fighting with declining consumer prices, deflation has also become a cause of concern. This is when most other countries in the region are thriving well and making economic progress.

The tax hike has led Japanese people to put off their purchases until later. People are delaying their purchases in the hope of getting better deals later. Not just that, the fear of an imminent crisis, has forced them to save their money. This has directly affected Japan's domestic consumption which has gone down considerably.

However, the Bank of Japan (BoJ) has been taking measures to improve the economy and fight people's fears. The BoJ recently, doubled the country's money supply with an aim to counter deflation. It has also lowered its interest rates.

The BoJ believes that with more money going into the system, Japanese businessmen and consumers will have extra money to spend on commodities -- they will make purchases that they have been purposely delaying. This will, in turn, lead to an increase in the demand of supplies. Since demand and supplies are directly co-related, the BoJ is hoping that an increase in demand will also lead to an increase in prices.

However, these recent measures taken by the BoJ have had a direct effect on the Japanese currency. As a matter of fact, since past November, the Yen has gone down by almost 25% against the Dollar.
Source: James Summer, Global Co-Chief Operating Officer of Equities - Acom Alliance