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LEAD: Jan.-March business confidence at highest in 15 years.

TOKYO, April 26 Kyodo


Business confidence at Japanese companies jumped in the January-March period to the highest level in 15 years due to brisk exports and a pickup in domestic demand, the government said Monday.

The Cabinet Office said in a preliminary report that its business survey index for the overall Japanese economy jumped to 29 during the reporting quarter from a revised 18 the previous quarter.

The figure, marking the fourth straight quarterly rise, was the highest since 32 marked in the January-March quarter of 1989.

The index for manufacturers rose to 29 from a revised 19, while that for nonmanufacturers moved up to 29 from a revised 17.

By sector, steel, pulp and paper, electrical machinery, retail, and financial and insurance industries marked steady improvements in business confidence, according to the report.

The index for external demand rose from a revised 18 to 24, the highest reading since comparative data were made available in the April-June period of 1984, underscoring the robust recovery of the U.S. and Chinese economies, it said.

The index for domestic demand was up from a revised 11 to 19, the highest reading since the January-March period of 1989.

The business survey index is designed to measure corporate managers' confidence in the economy and is calculated by subtracting the percentage of those who predict it will worsen from those who say otherwise. A positive reading means optimists outnumber pessimists.

Looking ahead, the index for the overall economy is projected to ease to 19 in the April-June quarter and then edge up to 20 the following quarter, but a Cabinet Office official said the figures may be revised upward because the economy continues to recover.

Private-sector economists also pointed out that the recovery will be sustained and widening, saying improvement in business sentiment among nonmanufacturers is a positive sign.

''Corporate sentiment is good, but companies still appear to be cautious about making substantial increases in employment and capital spending,'' said Masaaki Kanno, chief economist at J.P. Morgan Securities Asia Pte. Ltd.

''But they will start making forward-looking investments as domestic demand holds up and China's economy continues to grow steadily and absorb Japanese exports,'' Kanno said.

According to the report, the index for sales at respondent companies rose to 14 in the January-March quarter from a revised 5 the previous quarter, led by steel, oil and coal products, and retail sectors.

The index for pretax profit climbed to 12 from a revised 5, with that for pretax profit among manufactures rising from 11 to 19, the highest on record.

Meanwhile, companies are expected to have posted a 3.5% increase in capital spending in fiscal 2003 ended March 31, turning around an 8.5% decline the previous year.

They plan to register a 4.9% fall in capital spending in fiscal 2004 through March 31 next year.

The Cabinet Office surveyed 4,510 private companies capitalized at 100 million yen or more as of March 10, of which 88.3% responded.
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Publication:Japan Weekly Monitor
Date:May 3, 2004
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