TOKYO: Japanese business sentiment edged up in February and it is seen improving further, a Reuters poll showed on Thursday, underlining the economy's gradual recovery from a slump although companies remain wary about sluggish demand.
The Reuters Tankan - which closely tracks the Bank of Japan's key tankan survey - backs this week's GDP report which confirmed the economy pulled out of a recession, although annualised growth was well short of forecasts reflecting a hangover from a sales tax hike last year.
Slumping oil prices are expected to have a positive impact on resource-poor Japan on the whole, but many firms are struggling with higher import costs stoked by a weak yen, according to the poll of 483 big and midsize firms. Of these, 270 firms responded between February 2-17.
A weak yen has brought windfall profits to exporters of cars and electronics, helped by solid demand from the United States and Asia, but gains have so far been limited to large manufacturers in certain sectors.
The managers, who responded anonymously to the Reuters poll, complained about the lack of strength in private consumption amid the lingering effects of the tax hike as well as of the subdued external demand.
"Domestic demand for products related to private consumption has struggled and exports continue to be affected by sluggish Chinese markets," said a chemicals producer.
A nonferrous metal maker said: "Countries and regions other than the United States remain slow and we are unlikely to escape from such a situation for the time being."
The Reuters Tankan sentiment index for manufacturers rose to 11 from 9 in January, led by gains in autos/transport equipment industry. It is expected to improve further to 15 in May.
The service-sector index rose to 22 from 20 in January, although retailers remain pessimistic after the tax hike shock. The overall index is seen inching up to 23 over the next three months.
The survey indices subtract the percentage of companies saying conditions are improving from that of companies stating conditions are worsening. A positive number means optimists outnumber pessimists.
The BOJ's last tankan for December showed sentiment among big manufacturers worsened a tad and confidence improved only modestly among service-sector firms. Firms in both sectors expect conditions to worsen in March.
BOJ Governor Haruhiko Kuroda said on Wednesday he saw no need now to expand monetary stimulus as the bank raised its view on output and exports and stuck to its assessment that the world's third largest economy is recovering moderately.
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