Confidence surges at manufacturers

Confidence among Japan's large manufacturers rose to the highest since the early stages of the global credit crisis in 2007, as Japanese Prime Minister Shinzo Abe readies steps to cushion the economy from an increase in the sales tax.

The quarterly tankan index for big manufacturers rose to 12 last month from four in June, the Bank of Japan said yesterday. That exceeded the median estimate of seven by 30 economists surveyed.

The sentiment gain follows a 21 per cent slide in the yen against the US dollar in the past year that has made exporters more competitive.

"The tankan is a tailwind for the Abe administration and the plan to increase the sales tax," said Yoshimasa Maruyama, chief economist at Itochu in Tokyo. "The survey showed improvement across many sectors, both in manufacturing and non-manufacturing. The stronger-than-expected improvements in business confidence prove Japan is recovering."

The data adds to evidence of strength in the world's third-largest economy after the government revised up second-quarter growth on September 9.

While the survey showed smaller companies remained downbeat, many saw improvement from three months ago. The index for small manufacturers gained to minus nine from minus 14. That for small non-manufacturers increased to minus one from minus four, the highest since 1992.

Businesses revised downward their expenditure plans for the financial year to April. Large firms across all industries projected on average a 5.1 per cent increase in investment, less than a rise of 5.5 per cent three months ago.

"Overall, we can see that everything is moving in a positive direction," Chief Cabinet Secretary Yoshihide Suga said. "We can pursue 'Abenomics' with confidence."