Confidence rising in Japan, slowly
By Izumi Nakagawa |
July 13, 2010, Tuesday
|
Print Edition
Print Edition
JAPANESE manufacturing confidence edged up in July to its best in more than two years, but the pace of gains slowed from the past few months, a Reuters poll showed, in a sign companies may be wary of weaker economic growth.
A ruling party defeat in Sunday's upper house election has also complicated the outlook for the economy by threatening to create policy deadlock, stalling much needed fiscal reform.
"Prime Minister (Naoto) Kan's calls for a sales tax were rejected by voters. I think now the government needs to prioritize spending cuts over a tax hike," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"That means the Democrats need a huge revision to the spending plans pledged in their manifesto." Wholesale prices rose less than expected in the year to June and an index loosely tracking consumer prices fell, data released yesterday showed, a sign of a slow escape from deflation.
"If a rise in wholesale prices does not lead to one in final goods prices, Japan's deflation will not end, and that has been the case in the current economic recovery," said Junko Nishioka, chief Japan economist at RBS Securities.
"The latest wholesale prices data does not suggest a change in prospects for a prolonged deflationary trend."
The Reuters Tankan showed service-sector mood deteriorated, suggesting that an export-led recovery is yet to filter through to domestic demand in the face of persisting deflation.
Manufacturers expect only a slight recovery in their morale over the next three months. Service sector firms anticipate further improvement but pessimism is seen outweighing optimism, according to the Reuters Tankan survey, taken from June 23 to July 7.
The monthly poll, which has a 95 percent correlation with the Bank of Japan's tankan survey, showed the manufacturers' sentiment index up 3 points from the previous month to plus 12, the smallest gain since December last year.
"The world economic situation, particularly in Europe, is very unstable and we cannot dismiss concerns about a double-dip recession," said one chemicals firm in the survey, to which a total of 230 large companies responded.
Wholesale prices rose 0.5 percent in June from a year earlier, Bank of Japan data showed, less than the median forecast for a 0.6 percent increase.
Domestic final goods prices, which loosely track the consumer price index, fell 1.1 percent in June from a year earlier.
A ruling party defeat in Sunday's upper house election has also complicated the outlook for the economy by threatening to create policy deadlock, stalling much needed fiscal reform.
"Prime Minister (Naoto) Kan's calls for a sales tax were rejected by voters. I think now the government needs to prioritize spending cuts over a tax hike," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"That means the Democrats need a huge revision to the spending plans pledged in their manifesto." Wholesale prices rose less than expected in the year to June and an index loosely tracking consumer prices fell, data released yesterday showed, a sign of a slow escape from deflation.
"If a rise in wholesale prices does not lead to one in final goods prices, Japan's deflation will not end, and that has been the case in the current economic recovery," said Junko Nishioka, chief Japan economist at RBS Securities.
"The latest wholesale prices data does not suggest a change in prospects for a prolonged deflationary trend."
The Reuters Tankan showed service-sector mood deteriorated, suggesting that an export-led recovery is yet to filter through to domestic demand in the face of persisting deflation.
Manufacturers expect only a slight recovery in their morale over the next three months. Service sector firms anticipate further improvement but pessimism is seen outweighing optimism, according to the Reuters Tankan survey, taken from June 23 to July 7.
The monthly poll, which has a 95 percent correlation with the Bank of Japan's tankan survey, showed the manufacturers' sentiment index up 3 points from the previous month to plus 12, the smallest gain since December last year.
"The world economic situation, particularly in Europe, is very unstable and we cannot dismiss concerns about a double-dip recession," said one chemicals firm in the survey, to which a total of 230 large companies responded.
Wholesale prices rose 0.5 percent in June from a year earlier, Bank of Japan data showed, less than the median forecast for a 0.6 percent increase.
Domestic final goods prices, which loosely track the consumer price index, fell 1.1 percent in June from a year earlier.
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