Japan’s fourth quarter business mood likely improved, Omicron darkens outlook


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TOKYO: The business climate in Japan improved in the three months leading up to December and exports continued to benefit from robust global demand in November, according to a Reuters poll, offering policymakers hope that the economy is gradually emerging from its pandemic-induced slump.

The data would bode well for the Bank of Japan, which is expected to maintain an ultra-easy policy next week and debate whether to phase out pandemic relief fund programs that expire in March.

According to analysts polled by Reuters, the BOJ’s closely watched “tankan” survey is expected to show the overall major manufacturers’ sentiment index rose to plus 19 in December, from plus 18 three months ago.

“Manufacturer sentiment is likely to improve as the worst has passed in terms of chip shortages and supply constraints caused by plant closures in Southeast Asia gradually ease,” said analysts from Mizuho Research & Technologies.

The confidence index of large non-manufacturers should also rise from plus 2 to plus 6, the lifting on September 30 of the state of emergency to fight the pandemic having helped to stimulate consumption, according to the survey.

Large manufacturers and non-manufacturers both expect conditions to improve in three months, the poll said, underlining growing business optimism about the outlook.

The tankan will also show that large companies plan to increase their capital spending by 9.8% in the fiscal year ending in March, slightly lower than the estimate of a 10.1% gain in the previous survey, according to the survey.

But the December tankan is unlikely to take much of the impact of the recent spread of the new Omicron variant into account, which could hurt business confidence in the future, analysts say.

Markets are also focusing on the tankan indexes measuring corporate funding to see whether the BOJ will decide next week to cut financial support for pandemic relief.

The BOJ will release the poll on December 13 at 8:50 a.m. local time (December 12 at 11:50 p.m. GMT).

Separate data on Japan’s trade balance will show that exports rose 21.2% in November from a year earlier, a sign that strong global demand continues to support the economy, the poll found.

Machine orders, a leading indicator of business capital spending, likely rose 2.1% in October from the previous month, according to the poll.

The government will release machine order data on December 13 at 8:50 a.m. (December 12 at 11:50 p.m. GMT) and trade data on December 16 at 8:50 a.m.

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