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Economy in Brief

Japanese Industry Improves Further in Q2
by Carol Stone July 1, 2004

The Bank of Japan today released the TANKAN Survey for the second quarter, and once again, conditions came out better than forecast three months ago. The actual result for large manufacturing firms was, at +22, a full 10 points higher than the forecast of +12. Favorable readings were widespread across all parts of the survey, with every major sector showing improvement from March, even if just to a smaller negative reading. Most notably perhaps, "small" manufacturers shifted from negative to positive readings.

Among individual industries, iron and steel and machinery had substantial gains in the manufacturing sector for all three size categories of firms. There was more variation in non-manufacturing firms. Information services, business and personal services showed visible improvements at medium-size firms, but only modest gains at large companies. And the retailing industry actually deteriorated, in all size groups, weakening from the first quarter's result, missing the second quarter forecast and even dropping back into negative territory.

In the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling in March, we have segregated the recent detail data into new series in the "Japan" database. In summary data in the "G10" database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan's reorganization of the categories. By this special, linked measure, the actual result for the second quarter came in at zero, its first non-negative reading since 1997.

June 2004March 2004December 2003
Business Conditions:  % Favorable minus % Unfavorable
Actual Forecast for Sept Actual Forecast for June Actual Forecast for March
All Firms 0 -1 -5 -6 -11 -12
Large Firms* 16 16 9 9 4 5
  Manufacturing 22 21 12 12 7 6
  Non-manufacturing 9 11 5 7 0 4
Medium-sized Firms** 3 1 -2 -2 -8 -9
  Manufacturing 11 7 5 1 -3 -4
  Non-manufacturing -1 -3 -7 -6 -12 -11
Small Firms*** -10 -10 -13 -15 -19 -20
  Manufacturing 2 2 -3 -3 -10 -11
  Non-manufacturing -18 -18 -20 -21 -25 -27
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