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UPDATE 2-Japan Q1 business mood worsens but seen improving
March 14, 2012 / 12:51 AM / 6 years ago

UPDATE 2-Japan Q1 business mood worsens but seen improving

* Big manufacturers’ Q1 sentiment worsens - govt survey

* Manufacturers, analysts see improvement in April-June

* FY2012/13 capex seen down 0.3 pct from previous year

By Stanley White

TOKYO, March 14 (Reuters) - Big Japanese manufacturers turned slightly more pessimistic about business conditions in January-March, but sentiment is expected to improve in the next quarter with the yen off record highs and due to spending for post-quake reconstruction.

Wednesday’s data suggests the Bank of Japan’s closely-watched tankan sentiment survey, due next month, is unlikely to show a sharp worsening in sentiment.

But the central bank is likely to remain under pressure to offer additional monetary stimulus in the coming months with Japan’s recovery still shaky as pain from the global economic slowdown persists.

“Manufacturers’ sentiment may pick up in April-June given recent improvements in the U.S. economy and easing upward pressure on the yen,” said Junko Nishioka, chief Japan economist at RBS.

“But Japan’s recovery is very much reliant on external demand. The Bank of Japan will likely ease monetary policy again to achieve its price goal.”

The business survey index measuring large manufacturers’ sentiment worsened to minus 7.3 in January-March from minus 6.1 in October-December, according to a joint survey by the Ministry of Finance and an arm of the Cabinet Office.

But large manufacturers expect their sentiment index to rise 2.3 percent in April-June, against plus 0.7 expected in the previous survey, the data showed on Wednesday.

Companies expect capital spending to fall 0.3 percent in the financial year starting from April, the survey showed.

The BOJ kept monetary policy on hold on Tuesday after easing in a surprise move last month, but has expressed readiness to act again should risks to Japan’s fragile recovery heighten and hamper the country’s exit from deflation.

Central bankers will likely scrutinise the BOJ tankan, due out on April 2, for clues on whether the economy is on track for a moderate recovery or whether it needs further stimulus.

Japan’s economy suffered a mild contraction in the final quarter of last year, but analysts expect growth to have bounced back in January-March as output recovers and domestic spending for post-quake reconstruction supports capital expenditure.

The yen is now well off its record highs, trading near an 11-month low versus the dollar, giving exporters some breathing space.

The sentiment index measures the percentage of firms that expect the business environment to improve from the previous quarter minus the percentage that expect it to worsen.

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