"We still don't find any evidence that corporates are really starting to get confident about the sustainability of the recovery and actually ramping up domestic investment"
-Izumi Devalier, a Japan economist at HSBC Holdings Plc
The Japanese Yen rebounded versus the U.S. Dollar in the beginning of the week, capping some of earlier losses after the Japanese central bank posted better-than-expected data from manufacturing sector. A gauge of activity in the manufacturing sector soared to its six-year high, while non-manufacturing sector surprised markets on the upside as well. The BoJ's Tankan Manufacturing Index jumped to 16 in the final quarter, accelerating from a reading of 12 in the previous three month, and moving further away from zero level that indicates improving conditions. At the same time, non-manufacturing index ticked up to 20 from 14 in the third quarter. Sentiment among businesses improved for a second straight quarter, sending optimistic sign to Shinzo Abe. Across all businesses and sectors both the current situation and the future outlook have improved, even despite the outlook did not completely came in line with analysts' forecasts. The USD/JPY has moved back to 103 level, however, this move is unlikely to be interpreted as a sustainable, as there is still not much to support for the Japanese currency.
Though the data decreases pressure on the government, the economy still faces major global headwinds, and domestic problems are needed to be solved as well, including a bulging public debt and decreasing population. Companies pledged to increase capital spending by 4.6% in the fiscal year through March 2014. The figure is slightly below the expected level.
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