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Tankan offers mixed view for Japan
By Geoff Hiscock
TOKYO, Japan (CNN) -- Big business sentiment in the world's No. 2 economy, Japan, is more bullish than expected, the Bank of Japan's latest quarterly survey shows. The BOJ's closely watched Tankan survey, released Friday morning, shows the big manufacturers' diffusion index improved to minus 9 in the December quarter, from minus 14 in September. That five-point improvement follows a modest four-point gain in September and a spectacular 20-point jump in June. Most observers had expected the index to improve to about minus 12, though a decline to minus 20 was also seen as a possibility. But there is less optimism in the large non-manufacturing sector, with a decline to minus 16. Jeffrey Young, Tokyo-based head of economic and market analysis for Nikko Salomon Smith Barney, told CNN that on balance, the Tankan result was "mixed at best". He said the better figure for big manufacturers was mainly due to improvements in the automotive sector. Investment down
"What it says for the future is not that good," Young said, noting that businesses had revised downwards their capital investment plans for this financial year. "That is not leading to any optimism about the future," he said. The Japanese stock market showed little enthusiasm for the result, with the Nikkei dipping about 1.2 percent in morning trade Friday. That took its losses into an eighth straight day, and followed a 0.6 percent fall in the Dow Jones industrial average on Wall Street Thursday. The Tankan's business sentiment or diffusion index measures those who report favorable business conditions against those who see unfavorable conditions. The survey, which covers 8,500 manufacturing and non-manufacturing enterprises across Japan, is seen as a key forward indicator of the health of the economy. Medium manufacturers improved three points to minus 19 and small manufacturers gained four points to minus 33. But in the large non-manufacturing sector, the index fell three points to minus 16. In the medium non-manufacturing sector it was unchanged at minus 28, and up two points to minus 36 in the small non-manufacturing sector. GDP revised upRelease of the BOJ survey comes after the government on Monday revised upwards to 0.8 percent the growth rate for the economy in the September quarter. (Full story) The Cabinet office released an initial estimate on November 13 of 0.7 percent. Its revision lifts the annualized growth rate to 3.2 percent. In theory, that would make Japan among the faster-growing advanced economies. But the real outlook is less rosy, with the BOJ last month saying the economy now faced "greater uncertainty". That assessment was repeated by the World Bank's 2003 Global Outlook report released on Wednesday in Washington, in which it said there remained a "significant risk" that the world could slip back into recession. (Full story) The bank estimated Japan's economy would grow 0.8 percent next year, compared with 1.8 percent for the E.U., 2.6 percent for the U.S. and 6.1 percent for East Asia. After four quarters of contraction, the Japanese economy has now grown for two quarters, but there is a widespread view that momentum may have stalled because of an export slowdown to the United States. UBS Warburg chief economist in Tokyo, Hiromichi Shirakawa, told CNN this week that Japan's export momentum to the U.S. had already been lost, and there were some signs that the demand in Asia for Japanese goods also was weakening. Other threats to a sustained recovery include deflation, record unemployment and a mountain of bad loans in the banking system.
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