Big Japanese manufacturers grew more confident about business conditions in the three months to December, a government survey showed on Monday, underscoring views that brisk corporate activity is underpinning a modest but sustainable economic recovery.
The business survey index (BSI) of sentiment among large manufacturers in the October-December quarter rose to plus 10.5 from plus 6.4 in July-September, improving for a third straight quarter. The index has been recovering after hitting a bottom of minus 7.6 in January-March this year.
The index measures the percentage of firms that expect the business environment to improve minus the percentage that expect it to worsen.
Indices showing their expectations for the coming months were slightly lower at plus 6.9 for January-March and plus 6.2 for April-June in the survey, conducted jointly by the Ministry of Finance and the Cabinet Office's Economic and Social Research Institute.
"The manufacturers' survey is more evidence that the economy is recovering, although it was within expectations after the Bank of Japan's tankan showed a similarly solid trend in corporate sentiment," said Tatsuo Ichikawa, chief JGB strategist at ABN Amro Securities.
A strong showing in the government survey was largely in line with the quarterly tankan survey released earlier this month, which showed firms grew slightly more optimistic thanks to a recovery in corporate profits and a surge in share prices.
Japan's economy grew a modest 0.2 percent in July-September in real price-adjusted terms, which marked the third straight quarter of growth. But it is now in the third-longest expansionary cycle of the postwar era.
Against this background, Japanese firms have been enjoying strong profits as several years of painful restructuring efforts bear fruit.
Recurring profits in the business year to next March were seen up 6.8 percent from the previous year among all firms, compared with the 7.3 percent rise expected in the last survey released in September.
Their improved business conditions have attracted more investors to the Japanese stock market over the past year, adding to the optimism.
The Nikkei average has risen 38.8 percent so far this year, growing much faster than market indices in other major industrial nations.
It is also poised to mark its best year since 1988, during Japan's land and asset bubble period, when it rose 39.9 percent.
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