- Marcel Thieliant, Japan economist at Capital Economics
Business confidence in Japan held steady and companies kept their bullish spending plans, offering some relief to policy makers, who remained concerned that global headwinds could derail a fragile economic recovery. The headline index for big manufacturers' sentiment was at plus 12 in December, unchanged from three months ago, according to the Bank of Japan's quarterly Tankan survey. Big companies plan to increase capital spending by 10.8% in the fiscal year that ends in March. The data suggests firms will finally direct some of their record profits to wages and capital expenditures, responding to premier Shinzo Abe's stimulus policies that are aimed at ending two decades of economic stagnation. The data also heightens the chance the central bank would refrain from expanding its unprecedented stimulus programme, when it meets later in the week.
Japan narrowly escaped recession in the third quarter as capital expenditure rose more than initially estimated, but analysts predict any rebound in growth to be modest. Moreover, both big manufacturers and non-manufacturers anticipate business conditions to worsen in the coming three months, highlighting concerns that China's slowdown and the moderating pace of the Japanese Yen's drop could hurt exports.
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