Japan's manufacturers' mood up

Confidence among Japanese manufacturers bounced in December for the first time in four months and it is seen inching up ahead, a Reuters poll found, suggesting the economy is slowly emerging from a recession. In a sign of still-sluggish domestic demand, however, the service sector's mood slipped to the lowest level in a year as retailers were hit by weakness in private consumption, which accounts for about 60 percent of the economy.
The monthly Reuters Tankan, which closely tracks the Bank of Japan's tankan quarterly survey, showed sentiment for both manufacturers and the service sector is seen to be largely unchanged over the next three months. The poll of 514 big and mid-sized firms between November 20 and December 2 suggested that the central bank's key tankan readings due next week may show business mood struggled to improve in the current quarter. A total 259 firms responded in the latest poll.
"Manufacturers are wary of the outlook as commodity prices fall, and the service sector reflects weak private consumption," said Yuichiro Nagai, economist at Barclays Securities. "This survey backs our view that the economy's rebound will be tepid in the current quarter." Nagai said the central bank's upcoming tankan is likely to show the both sectors' mood worsening in the current quarter.
The Reuters Tankan sentiment index for manufacturers rose to 9 in December from 3 in November, the first improvement in four months, led by both materials and processing industries. The index is seen at 10 in March. Compared with three months ago, the manufacturers' index held steady, suggesting that the BoJ's upcoming quarterly tankan may show little improvement in the big manufacturers' sentiment. "Domestic orders are in a moderate recovery trend but sales and profits take time to recover due to the decline in orders from emerging Asian countries," a manager at a machinery maker said in the survey, which companies answer anonymously. "The drop in transaction volume and sales will persist for the time being given poor business conditions, reflecting China's slowdown, yen weakness and slumping private consumption, which hurt local regions," said a transport service firm.