Improved business sentiment as Japanese yen hits pass 110

Business sentiment in Japan improved in the three months to September, the Bank of Japan’s Tankan survey showed on Wednesday.

The headline index for big manufacturers’ sentiment rose to plus 13, above expectations of plus 10 in a Reuters poll and up from plus 12 in the previous quarter.

“The big manufacturers index is actually quite firm – we had been expecting manufacturing sentiment to come down a little bit considering that economic numbers have slowed but I think the weaker yen is lifting sentiment among manufacturers,” said Izumi Devalier, Japan economist at HSBC.

Big manufacturers expect the dollar-yen exchange rate to average 100.73 yen for the 2014/15 fiscal year; the dollar-yen was trading at 109.67 after the data was released.

Capital spending

The report also showed that big firms plan to raise capital spending by 8.6 percent for the fiscal year that started in April, compared with analyst forecasts for a 7.2 percent increase.

“[Fiscal year capex] surprised me a lot,” Devalier said. “It’s a very strong reading. We’ve had a string of very bad data over the past months but I think this is encouraging for the central bank,” she added, implying that the positive data could rule out further monetary easing in the coming months.

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