Sentiment among Japan’s big manufacturers improves to pre-pandemic levels

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Japanese big manufacturers’ sentiment improved to pre-pandemic levels in the first quarter as companies planned to increase capital expenditure this year, suggesting the export-reliant economy was benefiting from a solid recovery in global demand.

Confidence among big nonmanufacturers also recovered from three months ago, underscoring the fading strains from the coronavirus pandemic, a central bank survey showed on Thursday.

The headline index for big manufacturers’ sentiment rose to plus 5 in March from minus 10 in December, the Bank of Japan’s closely-watched tankan survey showed, marking the third straight quarter of improvement and hitting the highest level since September 2019.

It compared with market forecasts of a flat reading.

The data offers some relief for policymakers striving to revitalize the pandemic-hit economy as a fourth wave of infections raises uncertainty about the outlook.

Big nonmanufacturers’ sentiment improved to minus 1 in the March survey from minus 5 in December, the survey showed.

Big firms expect to increase capital expenditure by 3.0% in the year that began in April, compared with a median forecast for a 1.4% increase, the survey showed.

Like many countries, Japan deployed massive monetary and fiscal stimulus over the past year to lift the economy back from a record postwar slump.

Many analysts expect the economy to have contracted in the first quarter but see it gradually emerging from the doldrums as solid exports offset some of the weakness in consumption.

The BOJ tankan indexes are derived by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists.

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