Japan business mood seen turning positive: BOJ tankan

Thu Jun 27, 2013 11:45pm EDT
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By Leika Kihara

TOKYO (Reuters) - Japanese manufacturers' sentiment turned positive in the three months to June for the first time in nearly two years, a closely-watched central bank survey is likely to show on Monday in a sign recent market turbulence has yet to hurt the feel-good mood created by the government's reflationary policies.

The Bank of Japan's "tankan" survey will likely show the headline index for big manufacturers' sentiment improved 11 points from three months ago to plus 3, according to a Reuters poll.

That would be the second straight quarter of improvement and the first positive reading - which means optimists outnumbered pessimists - since the survey of September 2011, and vindication of Prime Minister Shinzo Abe's "Abenomics" policy of aggressive monetary stimulus and fiscal spending.

Service-sector sentiment also likely brightened as consumers spent more, with the index for big non-manufacturing companies likely to have risen 5 points to plus 11, the Reuters poll showed.

A positive reading will bode well for the central bank, keen to end grinding deflation that has haunted Japan for 15 years and achieve its 2 percent inflation target in roughly two years through aggressive monetary stimulus.

"You cannot deny that the economy is improving, and that domestic demand is leading the way," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

"Government stimulus spending is contributing to growth and the services sector is gaining strength. The BOJ's monetary easing is becoming more effective, so there's no need for additional measures."

The upbeat survey was compiled amid the market turmoil that drove up bond yields and wiped out gains in Tokyo shares made on hopes for Abe's stimulus plans. It should reinforce views the world's third-largest economy is steadily recovering, analysts say.   Continued...

Workers clean windows of an office building in Tokyo's business district February 20, 2013. REUTERS/Toru Hanai