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Tankan May Show Japan Recovery Is ‘Slipping Into a Standstill’ – Bloomberg.com Updated:New York, Dec 10 21:18London, Dec 11 02:18Tokyo, Dec 11 11:18 SYMBOL LOOKUP Ed Hardy Women Hoody
FEEDBACKHOMENEWSEXCLUSIVEWORLDWIDEREGIONSMARKETSINDUSTRIESECONOMYPOLITICSLAWENVIRONMENTSCIENCEOPINIONSPENDSPORTSARTS AND CULTUREEDITORS’ VIDEO PICKSBLOOMBERG MARKETS MAGAZINESPECIAL REPORTMARKET DATASTOCKSRATES & BONDSCURRENCIESMUTUAL FUNDSETFsCOMMODITIESECONOMIC CALENDARPERSONAL FINANCEJANE BRYANT QUINNJOHN DORFMANPORTFOLIO TRACKERCALCULATORSFINANCIAL GLOSSARYTV and RADIOBLOOMBERG TELEVISIONBLOOMBERG TELEVISION SYNDICATED REPORTSBLOOMBERG RADIOBLOOMBERG PODCASTSBLOOMBERG SHOWSCEO SPOTLIGHTCFO INSIGHTPORTFOLIO MATTERSMOBILEBUSINESSWEEKBUSINESS EXCHANGEBloomberg InnovatorsTechnologyCurrenciesForex Trading VideosETFsCEOCommoditiesExclusiveWorldwideRegionsMarketsIndustriesEconomyPoliticsLawEnvironmentScienceOpinionSpendSportsArts and CultureEditors’ Video PicksBloomberg Markets MagazineSpecial ReportRESOURCES Bloomberg TV Bloomberg Radio Bloomberg PodcastsBloomberg Press More News • China November Industrial Output Rises 19.2%, Above Economists’ Estimates • Hatoyama Means Stocks Plummeting as Yen Rises With Unfilled Japan Mandate • Geithner Says Treasury Likely to See Losses on Bailouts of AIG, Automakers Tankan May Show Japan Recovery Is ‘Slipping Into a Standstill’ Share Business ExchangeTwitterFacebook| Email | Print |A A A By Keiko Ujikane and Minh Bui Dec. 11 (Bloomberg) — The Bank of Japan’s Tankan businessconfidence index may rise the least since the economy emergedfrom its worst postwar recession as companies become moreconcerned the yen’s gains will erode profits. The Tankan index of sentiment among large manufacturerswill climb 6 points to minus 27 in December, according to themedian forecast of 16 economists surveyed by Bloomberg News. Itwould be the smallest improvement since the first quarter. Anegative number means pessimists outnumber optimists. Sentiment has been tempered by the yen’s rise to a 14-yearhigh against the dollar, which threatens profit and market sharefor companies from Toyota Motor Corp. to Canon Inc. PrimeMinister Yukio Hatoyama and central bank Governor MasaakiShirakawa, fresh from unveiling emergency measures to fightdeflation, will look at the report for hints of corporateoptimism at a time when global stimulus spending is running out. “We may start to see that the recovery is slipping into astandstill,” said Hideo Kumano, chief economist at Dai-IchiLife Research Institute in Tokyo and a former central bankofficial. “The result will be an important factor for thegovernment and BOJ when deciding how to act in this economicslowdown.” The report is due at 8:50 a.m. in Tokyo on Dec. 14. Theindex improved 15 points in September and 10 points in June,when it climbed from a record low of minus 58. The economy grewfor the first time in five quarters in the April to June period. The Nikkei 225 Stock Average has dropped more than 6percent in the past three months. The yen surged to 84.83 perdollar on Nov. 27, about 10 percent higher than largemanufacturers’ fiscal-year forecasts for the currency publishedin October. Scaling Back Exporters are scaling back their spending plans. Largeenterprises plan to cut capital spending by 11.3 percent thisfiscal year, according to the survey of economists. The figurecompares with the 10.8 percent decline that the Tankan showedthree months ago. G&D T-ShirtsShirakawa said this month the yen’s advance and fallingstock prices may have “adverse effects” on corporate sentiment.The central bank released a 10 trillion yen ($113 billion)credit program last week, a move that Deputy Prime MinisterNaoto Kan said helped weaken the yen. Hatoyama unveiled a 7.2 trillion yen stimulus package onDec. 8, his first since coming to power in September. The planincluded employment subsidies, loan guarantees and incentives tobuy energy-efficient products. Toyota Motor, Japan’s biggest automaker, aims to cutcapital investment by 70 billion yen from its initial plans forthe year ending March, a Nikkei Inc. survey showed on Nov. 30. Factory Capacity Even amid a resurgence in export demand thanks to some $2trillion in global stimulus spending, more than a third of thecountry’s factory capacity is sitting idle, giving firms lessroom to expand purchases of plant and equipment. “Even though a cyclical economic recovery continues, it’snot easy to solve the excess capacity that manufacturers hold,”said Ryutaro Kono, chief economist at BNP Paribas in Tokyo.“It’s difficult to imagine companies having a greater incentiveto increase business investment just because the level ofproduction has risen a bit.” Recent reports have also pointed to slower growth. Grossdomestic product rose an annualized 1.3 percent last quarter, athird lower than the government’s initial report. The EconomyWatchers index, a measure of merchant sentiment, fell by themost on record in November, the Cabinet Office said on Dec. 8. Surging Yen “The continued large output gap, intensifying price warand a surging yen would adversely impact on business sentiment,mainly among exporters,” said Hiromichi Shirakawa, chief Japaneconomist at Credit Suisse Group AG in Tokyo and a formercentral bank official. Falling prices have been squeezing profit at home,prompting the government to declare last month that the countryis back in deflation and push the Bank of Japan to do more tospur the economy. The Tankan confidence index among large service companieswill be minus 23, little changed from October’s minus 24,according to the median estimate of economists. Wages havefallen for 17 months to October. Not all think the outlook is dim for companies. Demand fromAsia, especially China, is helping Japanese exports andproduction. Exports fell at the slowest pace in a year inOctober and industrial output increased for an eighth month.China’s economy, Japan’s biggest overseas market, grew 8.9percent in the third quarter, the fastest expansion in a year,spurring demand for Japanese cars and electronics. “The worst is over for corporate earnings,” saidYoshimasa Maruyama, senior economist at Itochu Corp. in Tokyo.“We’ll probably continue to see an improvement in largemanufacturer sentiment.” G-d T-ShirtTo contact the reporter on this story:Keiko Ujikane in Tokyo at kujikane@bloomberg.net Last Updated: December 10, 2009 10:01 EST