TOKYO (dpa) – Japanese business sentiment slightly improved for the first time in two quarters despite sluggish consumer spending after a sales tax hike in April, the Bank of Japan’s Tankan survey showed Wednesday.
The closely watched indicator rose by 1 point to plus 13 after the government raised the national sales tax on April 1 from 5 per cent to 8 per cent. A positive number indicates optimists outnumber pessimists.
Prime Minister Shinzo Abe’s government plans to raise the tax once again to 10 per cent in October 2015.
Large manufacturers expect the index to be unchanged at 13 in the next quarter.
However, the index for large non-manufacturers dropped to plus 13 from plus 19, the survey showed.
Large corporations in the manufacturing and non-manufacturing sectors plan to increase capital investment by 8.6 per cent for the current financial year through March 2015, compared with 7.4 per cent in the previous survey, according to the survey.
Business sentiment among medium-sized manufacturers fell to plus 5 from plus 8 while the index for small manufacturers declined to minus 1 from plus 1.
The Tankan survey showed “companies are very carefully watching whether consumption will recover,” Tsuyoshi Ueno, senior economist at NLI Research Institute, said.
The tax hike in April has depressed consumer spending and industrial output. The government reported on Tuesday household spending declined 4.7 per cent from a year earlier for the fifth consecutive month in August and that industrial production also fell 1.5 per cent in the month from July.
For the April-to-June quarter, Japan’s economy contracted at an annualised rate of 7.1 per cent, the biggest setback in more than five years.
Meanwhile, the survey also showed the average of estimated exchange rates has declined to 100.73 yen to the dollar over the current fiscal year, compared with 100.18 yen predicted in June.
The central bank surveyed 10,369 companies from August 27 to September 30 for the latest Tankan survey, and 99.3 per cent responded.