A weaker yen and a soaring stock market are yet to improve profits and outlook at Japanese exporters, a key survey of business conditions showed on Monday.
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The Bank of Japan's Tankan's headline index, which compares the percentage of large manufacturers reporting positive business conditions with those reporting negative ones, was unchanged in the quarter that ended in March, remainging at minus 4. Analysts had forecast a reading of minus 1.
The much-watched quarterly survey also showed that executives expect the index to remain negative at minus 3 in June, due in part to expectations of renewed yen strengthening. So far this year the yen has fallen 7% against the US dollar, while all other major currencies have gained against the greenback. The Nikkei 225 stock average has also risen a fifth, putting it among the world's ten best performers.
Executives predict the yen will gain about 6% from today's level to average 78.14 per dollar in this fiscal year beginning in April - well below the 82 break-even point at which exporters said they could remain profitable, in a government survey released in February.
Other explanations for the gloomy assessments include "rising oil prices, and uncertainty over foreign demand, particularly Chinese," wrote Naohika Baba, economist at Goldman Sachs, in a note to clients.
The Tankan survey of almost 11,000 companies, collected this time between the last week of February and the end of March, has had a significant bearing on the BoJ's monetary policy in the past. In the two hours following the release on Monday morning the yen weakened almost 0.7% against the dollar, as traders bet the BoJ will take further easing steps. The central bank's Monetary Policy Committee meets twice this month, on April 9-10 and April 27.
One reason for the BoJ to hold off further easing measures, however, was the relative buoyancy of domestically-focused companies. The overall business conditions index for large non-manufacturers improved to 5 from 4 in December, the best reading since mid-2008. At large communications companies, for example - the likes of NTT DoCoMo, KDDI and SoftBank - the index was 52, the highest figure since 1988.
"Non-manufacturers' profitability has recovered impressively," said Takuji Okubo, chief Japan economist at Soci�t� G�n�rale in Tokyo. "This is a story of external weakness versus domestic resilience."
