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Instant View - Japan business mood improves on weaker yen, stock rally

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(Globalpost/GlobalPost)

TOKYO (Reuters) - Japanese business sentiment improved in the three months to March, a central bank survey showed, after Prime Minister Shinzo Abe's aggressive monetary and fiscal policy prescriptions helped weaken the yen and bolster share prices.

KEY POINTS:

- The headline index for big manufacturers' sentiment stood at minus 8 in March, compared with minus 12 in December and with a median market forecast of minus 7, the quarterly tankan survey showed on Monday.

- The big non-manufacturers' sentiment index stood at plus 6 in March, compared with plus 4 in December and compared with a median market forecast of plus 8.

COMMENTARY:

TATSUSHI SHIKANO, SENIOR ECONOMIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES

"The headline figure was a little weaker than expected but sentiment among big manufacturers did improve and is seen improving markedly over the coming three months.

"The tankan result reflected companies' expectations that a weaker yen and policy steps pursued by the government will have a positive impact on the economy.

"The tankan outcome aside, the Bank of Japan will ease policy at its April 3-4 policy review as the BOJ governor is expected to make good on his promise of pursuing bold monetary easing.

"I expect the central bank will take comprehensive easing steps involving expansion of its asset purchase programmes and front-loading of open-ended asset purchases."

YOSHIKIYO SHIMAMINE, CHIEF ECONOMIST, DAI-ICHI LIFE RESEARCH INSTITUTE

"The positive effects of the weak yen and the rise in stocks, as well as the slight improvement in the U.S. economy, were not felt strongly by big manufacturers as of March, although their expectations for the future have improved.

"What caught my eye is that the mood is improving faster amid manufacturers than non-manufacturers - this is because there are some non-manufacturers that are likely to suffer from the weaker yen.

"I'm pretty sure that sentiment will continue to improve as we'll see the positive effects of the weaker yen and bold monetary easing policies eventually filter through and positively affect the performance of companies. Also note that manufacturers predict the dollar to stand at around 85 yen in next fiscal year, which is an extremely conservative estimate at this point."

BACKGROUND:

- The Bank of Japan is expected to boost asset purchases and debate an overhaul of its policy framework at its two-day policy meeting that ends on Thursday, in a show of resolve to achieve its 2 percent inflation target in two years.

- Expectations that new BOJ Governor Haruhiko Kuroda will drive the central bank into more aggressive monetary easing have pushed up Tokyo share prices and weakened the yen, giving the export-reliant economy some support.

- Japan's economy is headed for a moderate recovery due in part to a pick-up in global demand and the yen's weakening. Analysts expect the world's third-largest economy to have achieved 1.0 percent growth in the year ended in March and to expand 2.2 percent in the next fiscal year.

(Reporting by Leika Kihara, Kaori Kaneko and Tetsushi Kajimoto; Additional reporting by Antoni Slodkowski; Editing by Chris Gallagher)

http://www.globalpost.com/dispatch/news/thomson-reuters/130331/instant-view-japan-business-mood-improves-on-weaker-yen-stock-r