Japanese firms feeling confident

Japanese firms are feeling confident and are set to boost investment in the coming months, according to a Bank of Japan study of business sentiment. September's quarterly Tankan survey of large manufacturers rose to a larger than expected 24, up from 21 in June.

Analysts said the improvement had come because of a weaker yen and more optimism about company earnings. A lower yen makes Japanese exports cheaper and more competitive on world markets, and boosts earnings when dollar transactions are converted back into yen. The confidence figure of 24 was a two-year high, and raised the prospects of a further hike in interest rates within the next six months.

"This is positive news for the Bank of Japan and we believe that this can leave room for a rate hike before the end of the year," said Masaaki Kanno, chief economist at JP Morgan Securities. The Bank of Japan ended six years of zero interest rates in July when it raised the benchmark rate to 0.25%. The rate rise signalled the bank's confidence in the strength of the Japanese economy, which has seen accelerating growth and falling unemployment.

Adapted from BBC Online, October 2006

chinese translation | japanese translation | korean translation