- Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting Co.
Sentiment among Japanese manufacturers soared to its highest level since 2007 in the first quarter of this year, suggesting companies feel confident about the economy due to all efforts from the government, a survey from the Bank of Japan showed. A gauge of sentiment rose to 17 in the first three month of 2014, following 16 a quarter earlier. Nevertheless, the data missed analysts' forecasts, who expected a figure of 18. Any reading above zero indicates improving conditions in the sector. A measure of financial position gained as well, while employment conditions deteriorated due to the low unemployment rate, which is making it more difficult for employers to find skilled workers. Following the report the nation's Finance Minister Taro Aso claimed that Abenomics are having a positive effect on the economy.
Gains in the manufacturing, however, are likely to be short-lived, as analysts project the index will drop to 8 in the June quarter. It is expected that April's first consumption tax hike to 8% will become a burden for domestic households and companies, and will cool down demand. The next several months will be key in whether Shinzo Abe will proceed with the planned further revision of the sales tax to 10%, while the central bank will have to decide whether additional stimulus is required. Currently, analysts believe May's meeting will be the most appropriate time.
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