Japanese firms are becoming increasingly upbeat after three years of gloom, according to Japan's leading business confidence survey published today.
But analysts said the recent meteoric rise of the yen could erode much of that confidence in the months ahead. In the latest sign that Japan's economy is emerging from a decade of stagnation, the Bank of Japan's "Tankan" survey rose to plus 1 in September from minus 5 in June.
It was first time the closely watched gauge of corporate sentiment has been zero or better since it touched 10 in December 2000.
The results of the survey, conducted between August 28th and September 30th, came after Japan escalated its war against a higher yen yesterday, intervening openly overseas to try to stem a rise that has taken the Japanese currency to nearly three-year highs. That surge followed a call for flexibility in exchange rates by Group of Seven economic powers less than two weeks ago.
The tankan survey showed that big manufacturers expected an average dollar rate of 117.99 for the year to March 2004, but the rate this morning in Tokyo was around 111.43. The tankan trend mirrored other recent data suggesting Japan's economy is finally improving.
A Reuters poll also released on Wednesday showed that manufacturing activity in Japan expanded at its fastest pace in 15 months in September, as firms in all main sectors raised output to cope with a rise in orders, particularly from home.