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Economy in Brief

Big Business in Japan Becomes More Optimistic 
by Louise Curley September 26, 2005

Large Corporations (corporations with capital of 1 billion or more) in Japan have become more optimistic according to the Business Outlook Survey conducted by the Ministry of Finance (MOF) and the Cabinet Office's Economic and Social Research Institute.The percentage of all large corporations reporting better rather than worse current conditions in the third quarter rose to 9.7% from 0.9% in the second quarter. This was below the estimate of 11.3% for the third quarter made in the second quarter. However, the current estimate for the next quarter--the fourth of 2005--is 10.7%, which suggests that the optimists continue to outweigh the pessimists. As for large manufacturing corporation, while the mood has become more optimistic, the excess of better over worse conditions for the current quarter is only 6.4%. In looking ahead, however, large manufacturers have been estimating steady improvement

The latest survey shows that optimists outweighed pessimists in medium sized corporations (corporations with capital of 100 million to 1 billion yen) in the current quarter. and are expected to continue to do so. Small sized corporations (corporations with capital between 10 and 100 million yen) continue to be pessimistic, but their degree of pessimism had begun to diminish.The excess of pessimists fell from 21.4% to 15.1% in the current survey.

Some analysts have come to look upon the MOF's Business Outlook Survey as an indicator of the business conditions indicator for large enterprises in the more widely known Tankan Survey that tends to be released about a week or so after the MOF survey. (The next Tankan results are due on October 3, 2005.) The attached chart showing the next quarter estimate of the Business Outlook Survey and the forecast of business conditions for large enterprises in the Tankan Survey seems to bear out this hypothesis, but it should be kept in mind that as it is based on only a small number of data points it significance is yet to be tested.

Ministry of Finance Business Outlook Survey Current  Quarter Estimate   Next Quarter  Estimate
 of Change Q3 05  Q2 05 Q1 05   Q4 05 Q3 05  Q2 05
All Industry              
  Large Corporations 9.7 0.9 0.6   10.7 11.3 3.6
  Medium Corporations 5.5 -5.0 -9.7   7.5 7.5 3.4
  Small Corporations -15.1 -21.4 -24.3   -3.8 -12.6 -11.1
Manufacturing              
  Large Corporations 6.4 -2.4 -7.6   11.1 10.9 1.9
  Medium Corporations -5.1 -6.9 -18.7   8.1 8.2 7.8
  Small Corporations -11.9 -19.9 -24.6   -1.7 -10.5 -9.1
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