Bank of Japan business survey shows mood upbeat despite recent slew of gloomy indicators



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TOKYO — The mood among big Japanese corporations is unexpectedly upbeat despite recent data showing the recovery appears to be stalling.

The Bank of Japan's quarterly "tankan" business survey released Wednesday showed a reading of 15 in June, up from 12 in March, for large manufacturers. Among large non-manufacturers it was 23, versus 19 previously.

Large companies plan to boost their capital investment by 9.3 percent from a year earlier, revised up from minus 1.2 percent in March.

The survey reflects the number of those responding with a favorable assessment of business conditions minus those with a negative assessment. So it is considered a gauge of confidence about the economy.

Weaker-than-expected exports and corporate investment have stunted growth after the economy expanded at a relatively robust annual pace of 3.9 percent in January-March. So many experts say the economy may have contracted or stayed flat in the April-June quarter.

Companies routinely overestimate their plans for spending in April-June, which is the beginning of Japan's fiscal year, says Marcel Thieliant of Capital Economics.

"Firms reliably turn more optimistic in the second quarter, so we wouldn't read much too into this improvement. What's more, these 'projections' do in fact lag actual capital expenditure," he said in a commentary.

He foresees a "sharp slowdown" in the economy in April-June, based on weakness in consumer demand, the biggest driver of growth in Japan.

Industrial output fell 2.2 percent in May from the month before and is still 16 percent below its peak in 2008, noted Richard Katz of the Oriental Economist.

Demand for light vehicles, chemicals, electric components and pharmaceuticals was sluggish, prompting JP Morgan economist Masamichi Adachi to revise his growth estimate for the current quarter to zero from an earlier forecast of 1.5 percent.

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