Business Confidence in Japan in Sharp Rise Over Last Year

This is the week for the release of a number of measures of Japanese consumer and business sentiment. A report on consumer sentiment is due on Wednesday and the Bank of Japan's quarterly survey of business sentiment, known as theTankan is due on Friday. Today we have the Ministry of Finance's measure of business confidence and the Japanese Economy Watchers Survey.

The latter, a relatively new measure begun in 2000, is intended to provide a picture of present and future region-by-region economic trends. It is a monthly diffusion index. The Economy Watchers Survey currently covers eleven regions across the country and is based on the appraisals of 2,050 people. Opinions on the outlook for household and corporate activity, retail sales and employment, for example, are given. The results are coordinated by the Japan Economic Research Institute.

After rising in each month since March, the future outlook for the total and all of the components of the Economy Watchers Survey fell in November. However they were all between 20 and 40% above year ago figures. Even with the decline in November, there is a good chance that the fourth quarter average will, at worst, equal the third quarter average.

In contrast, the MOF's measure of business confidence among large corporations increased 10.8 percentage points from the third quarter to the fourth, while confidence among medium sized corporations rose 7.1 point and confidence among small corporation, 8.2 points. Although confidence has improved in all corporations, it is still in negative territory among medium and small sized businesses. However, the improvements over year ago figures show a significant improvement in business confidence.