11.09.201406:16:33UTC+00Japanese business confidence rises

A government survey has shown that the confidence of businesses in Japan grew positive in the current quarter to possibly indicate the start of a slow recovery from the effects of a sales tax hike.

Results of the study jointly conducted by the Ministry of Finance and the Cabinet Office also showed that more businesses are expecting market conditions to improve in the coming months alongside a rise in investments to support the government’s goal of promoting growth by boosting business activity, consumer spending, and wages.

Data demonstrated that Japan’s business survey index (BSI) of sentiment at large manufacturers increased during the period of July to September to positive 12.7 from negative 13.9 in the previous three months and could further climb to 15.1 in the last quarter of the year. RBS Securities’ chief economist for Japan, Junko Nishioka, said that, "It's true business sentiment soured temporarily after the April sales tax hike. But that hasn't dampened companies' spending appetite too much.”

The new figures suggest that the results of the Bank of Japan’s (BoJ) tankan survey for the third quarter, which are expected to be released on October 1st, will show a similar improvement in business sentiment. Analysts believe that, while disappointing tankan results could add pressure to the central bank to adopt new growth inducing stimulus, the BoJ is not likely to loosen its current easy monetary policy due to its current bullish economic outlook.

Japan’s sales tax was increased from 5% to 8% earlier in April which caused its economy to contract in the second quarter by the largest margin since the 2009 global crisis. Another planned tax increase slated for 2015 is now being questioned.