TOKYO: Japanese business sentiment worsened in the three months to December, the central bank's closely watched tankan quarterly survey showed, as the global slowdown and a territorial row with China hit the export-reliant economy.
The survey result heightens the case for the Bank of Japan, already under intense political pressure for bolder action ahead of a general election on Sunday, to ease monetary policy further next week to support an economy seen as already in recession.
- The headline sentiment index for big manufacturers stood at minus 12, down from minus 3 in September and compared with a median market forecast of minus 10.
- The non-manufacturers' sentiment index stood at plus 4 against plus 8 in the September survey and compared with a median market forecast of plus 5.
- Big firms project capital spending to rise 6.8 percent in the fiscal year ending in March, versus a 6.4 percent increase projected in September.
TATSUSHI SHIKANO, SENIOR ECONOMIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO
"The tankan confirmed the severity big Japanese manufacturers faced due to the global slowdown and a slump in car sales at home due to the expiration of government subsidies for low-emission car purchases.
"But a slight pick-up in the outlook figure suggests, as the Reuters Tankan did, that both corporate sentiment and the economy may have bottomed out in the autumn and will gradually start heading for a recovery.
"I expect the BOJ to ease monetary policy further next week in order to drive some positive movements emerging among the corporate sector."
HIROSHI MIYAZAKI, CHIEF ECONOMIST, SHINKIN ASSET MANAGEMENT CO, TOKYO
"We can see sentiment is worsening across the board, whether in manufacturing or services.
"If the BOJ was leaning toward easing policy, this tankan survey will give them a nudge in that direction. There are not any signs that sentiment will recover quickly.
"Overseas demand was weak and this is behind the worsening sentiment in the tankan.
"What's worrying is that companies say it's not just overseas demand that's weak. Companies are also saying domestic demand is not healthy.
"The BOJ could extend the duration of government debt it buys, or stop paying interest on reserves that commercial banks park at the BOJ."
SHUJI TONOUCHI, SENIOR FIXED INCOME STRATEGIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO
"Both manufacturers and non-manufacturers were worse than expected. Declines in exports are hurting manufacturers, but for non-manufacturers, the numbers show that the benefits of reconstruction spending are starting to fade.
"There were already expectations for the Bank of Japan to ease policy after the Federal Reserve's move. The tankan results support further easing by the BOJ."
Center>Copyright Reuters, 2012