Japan corporate sentiment worsens, capex plans revised up

Sun Jun 12, 2016 8:43pm EDT
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By Stanley White

TOKYO (Reuters) - Sentiment at large Japanese manufacturers worsened for the second consecutive quarter over April-June due to a rising yen, although companies did revise up their capital expenditure plans.

Large manufacturers said they expect sentiment to rebound in July-September, offering encouragement to policymakers navigating weak exports and lingering concerns about the global economy.

The survey results could offer some relief to the Bank of Japan, which holds a monetary policy meeting later this weak. The upgrade of capital expenditure plans should bolster the central bank's argument that its negative interest rate policy would spur lending.

"Right now the economy is in a holding pattern, but I don't expect things to worsen from here on," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"The benefits of negative rates have been elusive so far, but we could finally be seeing the capital expenditure boost."

The business survey index (BSI) of sentiment at large manufacturers was minus 11.1 in April-June, compared with minus 7.9 in January-March. The BSI is compiled by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office.

The index measuring big manufacturers' sentiment three months ahead was at plus 7.0 versus plus 7.1 previously.

Companies forecast their capital expenditure to rise 3.8 percent in the business year that started in April, versus a 6.6 percent decline forecast in the previous survey.   Continued...

Smoke is emitted from a chimney as a man fishes at the Keihin industrial zone in Kawasaki, Japan, March 28, 2016.  REUTERS/Yuya Shino/File Photo