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| July 5, 2000 | atimes.com | ||
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Japan
Japanese companies see brighter future TOKYO - The diffusion index (DI) for big manufacturers was positive in June, according to the Bank of Japan's (BOJ) latest tankan survey released Tuesday morning, the first positive outlook since the September 1997 quarterly survey and the sixth reported improvement in a row. The diffusion index for big manufacturers - the percentage of companies enjoying favorable conditions minus those with a negative view - was plus 3, compared with minus 9 in March. Non-manufacturers and small- and medium-sized firms also improved their sentiment, the tankan revealed. It also showed that upward revisions in expenditure plans in the current fiscal year are spurring increased capital spending. As of June, big manufacturers are expected to increase capital spending by 11.3 percent in fiscal 2000, the highest anticipated increase since 1990. Spending at big nonmanufacturers is likely to grow 0.7 percent, the first increase in four years. Big manufacturers in all industries, except timber and wood products, indicated more positive sentiment. Large improvements were seen in the paper and pulp industry, now enjoying recovering prices, and in the steel industry. Electric machinery makers also maintained their upward momentum thanks to growing demand for information technology equipment. Large manufacturers also raised their sales forecasts for the current fiscal year by 2.5 percentage points compared to the March survey and now expect a 3.8 percent increase in revenue. They lifted pretax profit forecasts by 10.6 percentage points and are now looking for a 21.1 percent improvement. As a result, big manufacturers expect the ratio of pretax profit to sales to be 4.26 percent, the highest ratio since fiscal 1990. Smaller manufacturers intend to slash capital outlays by 1.7 percent and smaller non-manufacturers by 9.4 percent, however, both reductions are less than anticipated in the March survey. Smaller manufacturers expect pretax profit to jump 25.8 percent in fiscal 2000, compared with 34.2 percent in the March tankan, because they now project pretax profit to surge 75.5 percent in fiscal 1999, sharply higher than the 56.8 percent forecast in the previous survey. They anticipate a pretax profit-sales ratio of 3.06 percent for fiscal 2000, up 0.13 percentage point from March's figure. Similarly, smaller firms predict capital investment to fall 7.6 percent in fiscal 2000, against a 6.8 percent decline in the March survey, as they have revised upwards the estimate for capital spending in fiscal 1999 by as much as 10.1 percent from the previous survey. The 7.6 percent drop could, in effect, mean around zero growth for fiscal 2000, according to analysts. Despite companies reporting greater optimism, Finance Minister Kiichi Miyazawa has indicated he believes it is too early for the Bank of Japan to consider raising interest rates at its July 17 policy board meeting. ''A change in (monetary) policy could be interpreted as a signal that Japan's overall economic policy is shifting,'' Miyazawa said, suggesting care should be taken to ensure that monetary policy remains consistent with the economic policy of prioritizing recovery. (Asia Pulse/Nikkei) |
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