JETRO Releases Results of Monthly Survey on Japanese Business Sentiment in East Asia.

Tokyo, Japan, July 26, 2006 - (JCN Newswire) - JETRO's monthly survey of Japanese companies and affiliates operating in 12 countries/regions of East Asia revealed that overall current sentiment was mixed in the ASEAN region, while continuing on an upward trend (that began at the end of 2005) in mainland China.

JETRO polls the companies to measure year-on-year changes, expressed as diffusion indices, in their business outlooks for the current month and the next two to three months going forward.

Overall current business sentiment for the five ASEAN countries included in the survey declined slightly over the previous month, with the index remaining in negative territory for the eighth straight month in July (individual indices - with the exception of Singapore - also lingered in negative territory in July). By country, sentiment was strong in Singapore, where Japanese firms in the country's electric/electronics sector continued to enjoy export growth in semiconductors and other products. Firms in Singapore's transport, communications, commerce and services sector were also buoyant, on the back of the country's growing export volume. Indices for Indonesia, Malaysia, the Philippines and Thailand, however, continued to hover in negative territory in July; the index for Indonesia marked its lowest point since the survey began in June 2001.

Overall forward business sentiment for the ASEAN region improved 4.3 points in this month's survey. Forward sentiment was up in Indonesia and Thailand, owing to an expected recovery in domestic demand for transport equipment. The index for the Philippines was also up in July, reflecting strong demand in overseas markets for goods in the country's electric/electronics equipment sector.

Overall current business sentiment for China and North Asia improved slightly over the previous month in July, with the index for mainland China gaining 4.4 points (it now stands at 19.7). By industry in mainland China, indices were especially strong in the electric/electronics equipment sector (due to growing demand for semiconductors and high-end electric products) and the transport equipment sector (on the back of increased local production by Japanese automakers). The index for Hong Kong rose 10.6 points in July (now at 16.7), while the index for Taiwan remained in negative territory for the fourth straight month, on the back of stagnant transport equipment sales in Taiwan's domestic market. Reflecting declining economic sentiment in the Republic of Korea (ROK) - rooting from rises in the Korean won and higher oil prices - the index for ROK fell 22.8 points over the previous month in July.

Overall forward business sentiment for China and North Asia declined 2.8 points in this month's survey. Indices for mainland China and Hong Kong remained strong, while those for ROK and Taiwan continued on a downward trend.

A total of 726 replies were received in ASEAN countries (120 in Indonesia, 104 in Malaysia, 188 in the Philippines, 213 in Singapore and 101 in Thailand), 204 in China (45 in the North, 63 in the Northeast, 59 in the East and 37 in the South); 138 in Hong Kong; 35 in the ROK and 103 in Taiwan.

JETRO, in cooperation with Japan's Ministry of Economy, Trade and Industry , has been conducting the survey in the first week of every month since June 2001 in the five major ASEAN countries, since June 2002 in South China, Hong Kong and Taiwan, since July 2002 in North and East China, and since October 2002 in the ROK and Northeast China. Results for the ROK are broken down into manufacturing and non-manufacturing only, but not by industry, and no breakdown is given for Northeast China, due to the small numbers of companies surveyed in these areas.

The aim of the survey is to provide up-to-date information on business conditions in the Asian economy to help companies develop more effective business strategies. Firms are asked to compare earnings prospects, supply and demand, inventory, sales prices and accounts receivable with the same period one year earlier. The current month and the following two to three months are evaluated separately in each question. Replies are limited to "better," "same" or "worse" than a year earlier. The diffusion index is the difference between the ratio of positive ("better") and negative ("worse") responses.

Current Business Sentiment

The July DIs for Japanese companies operating in Asia remained in the negative range for all the ASEAN countries except Singapore. By contrast, business sentiment among Japanese companies in China has continued on a moderate upward trend since the end of last year.

ASEAN 5

The July DI declined 1.0 point for ASEAN as a whole, showing negative figures for eight consecutive months (-8.0 in June to -9.0 in July). Looking at the DIs by country, we see that Singapore (from 19.4 in June to 20.2 in July) showed increasingly active freight movement overseas, with favorable exports of electric and electronic machinery, and particularly semiconductors, so that transportation, telecommunications, commerce and services also remained favorable. Meanwhile, the four countries other than Singapore continued to show negative figures all around from the previous month. Indonesia recorded the new lowest figure (-44.9 in June to -48.4 in July) since the surveys began in June 2001.

The outlook DIs for two to three months ahead show an increase for ASEAN as a whole of 4.3 points (-9.0 in July to -4.7). Thailand and Indonesia rose because of an expected recovery in domestic demand for transportation machinery, and the Philippines rose because, among other factors, electric and electronic machinery for overseas markets is considered favorable.

China and North Asia

The July DIs rose to 11.4 in China and North Asia overall, an increase of 3.4 points from June (8.0 in June to 11.4). Looking at the figures by region, we see that China showed active demand for high value-added electrical products and semiconductors in electric and electronic machinery. Transportation machinery was also favorable, with increased production of automobiles. The figure rose by 4.4 points from the previous month, to 19.7. There was an increase in Hong Kong, as well, which rose by 10.6 points to 16.7. Meanwhile, Taiwan was affected by a continuing slump in the domestic demand-oriented transportation machinery industry, and remained in the negative figures for the fourth consecutive month at -9.7. The Republic of Korea showed a deterioration in domestic business sentiment due to the rise in the value of the won, rising crude oil prices, and other such factors, leading to a decline of 22.8 points from the previous month (from 28.5 in June to 5.7 in July).

Although the outlook DIs for two to three months ahead continued to hold at favorable levels in China and Hong Kong, business sentiment showed a deteriorating trend in the Republic of Korea (-11.5) and Taiwan (-10.7). The figure for China and North Asia as a whole declined 2.8 points (from 11.4 in July to 8.6).

About JETRO

The Japan External Trade Organization , or JETRO, is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO's core focus in the 21st century has shifted toward promoting foreign direct investment into Japan and helping small- to medium-sized Japanese firms maximize their global export potential.

Source: JETRO

Contact:

Japan External Trade Organization (JETRO)
Public Relations Division
Phone: [phone]
Fax:  [phone]
http://www.jetro.go.jp

Copyright [c] 2006 JCN Newswire. All rights reserved. A division of Japan Corporate News Network K.K.