Big manufacturers` sentiment marks 1st fall since March 2009: BOJ

TOKYO, Dec. 15 Kyodo -
Business sentiment among major manufacturers in Japan worsened for the first
time since March 2009 amid slower exports and the termination of a government
subsidy program for car purchases, the Bank of Japan's December Tankan survey
showed Wednesday, another sign that the nation's economic recovery is stalling.
The key index of sentiment among big manufacturers for the current quarter
through December fell 3 points to plus 5 from the previous quarter, but the
range of decline was less than expected. The survey also highlighted that
companies are cautious about the outlook and employment as uncertainties linger
over the economic situation overseas.
Surveyed companies said the number of graduates they have hired or plan to hire
in fiscal 2010 has been cut by 22.7 percent from a year earlier, the sharpest
decline since fiscal 1994, according to a BOJ official. They plan to reduce the
number also in fiscal 2011.
Still, the outcome of the quarterly survey is unlikely to urge the central
bank, which will hold a two-day policy meeting next week, to take fresh
monetary easing steps quickly because the deterioration was not so sharp, some
analysts said.
Chief Cabinet Secretary Yoshito Sengoku said the government would implement
''measures to promote domestic investment and increase employment in an
energetic manner'' during a regular press conference held the same day.
Sentiment among nonmanufacturing enterprises also deteriorated for the first
time since March 2009, or for the first time in seven quarters, with the index
losing 1 point to plus 1.
The December diffusion indexes for major manufacturers and nonmanufacturers
compare with the average market forecasts of plus 3 and minus 1, respectively,
in a Kyodo News survey.
As for the outlook, both major manufacturers and nonmanufacturers expect
sentiment to worsen in the next three months, with the indexes slipping
respectively to minus 2, and minus 1.
The diffusion index represents the percentage of companies reporting favorable
business conditions minus that of firms describing an unfavorable environment.
Junko Ikkatai, an economist at the Japan Research Institute Ltd., said the
sentiment of major automakers did not sour as much as expected, despite the
termination in September of the government subsidy program for purchases of
environmentally friendly vehicles.
But she added she cannot find future ''upswing factors'' for major
manufacturers, with the government scaling down another incentive program for
purchases of energy-efficient home appliances.
The sentiment of major automakers dropped 11 points to plus 21 in the period
through December, while that of major electrical machinery makers fell 12
points to plus 2.
Meanwhile, big companies in both manufacturing and nonmanufacturing sectors now
plan to increase their capital investments by 2.9 percent in fiscal 2010 from
the previous year, an upward revision from the 2.4 percent projected in the
September Tankan survey.
As for earning prospects, large manufacturers expect their pretax profits in
fiscal 2010 to grow 57.8 percent from a year earlier and major nonmanufacturers
are expecting an increase of 17.1 percent.
But compared with the previous survey, they revised downward their profit
forecasts for the second half of the current fiscal year, partly because of the
yen's appreciation.
In the survey, big manufacturers anticipate that the U.S. dollar will average
86.47 yen in fiscal 2010, compared with 89.66 yen anticipated in the September
survey. It is the highest level of projection for the yen's value since the BOJ
started to take the data in fiscal 1996.
A strong yen remains a concern for many Japanese exporters, a key driving force
of the country's economy, as it erodes the value of their earnings when
repatriated.
The BOJ surveyed 11,183 companies between Nov. 11 and Dec. 14, of which 98.9
percent responded.
While the Tankan survey is known as a key factor taken into account by the BOJ
in deciding its monetary policy, economist Ikkatai said the latest outcome is
unlikely to press the BOJ to take any fresh action quickly.
''I think they will take a wait-and-see stance a little more,'' she said.
In October, the BOJ decided to ease its monetary grip further by effectively
resuscitating its zero-interest-rate policy. It has also decided to set up a
program to buy long-term government bonds and higher-risk assets such as
exchange-traded investment funds and real estate investment trusts.
==Kyodo