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Confidence Surges For Japan's Big Manufacturers

Confidence among Japan's major manufacturers has jumped unexpectedly with spending on new plants and equipment set to rise sharply, keeping the economic recovery on track, the central bank said Oct. 2.

Sentiment among large manufacturers increased to 24 in September from 21 in June, the Bank of Japan said in its closely watched Tankan survey of almost 10,000 companies. The figure was well above the 21 level expected by the market. A positive reading means that confident firms outweigh pessimistic ones.

The report is likely to re-ignite talk of another rise in Japanese interest rates either late this year or in 2007. The central bank ended the era of free credit in July with a quarter point interest rate rise, the first for almost six years.

But with a U.S. economic slowdown expected to put the brakes on Japan's own recovery, the major manufacturers remained somewhat cautious about the outlook, forecasting a drop in the index back down to 21 by December.

Major manufacturers plan to boost capital spending by 16.9% on average in the fiscal year to March 2007, up 0.4 percentage points from the increase predicted in the previous survey. All companies surveyed plan to raise spending by 8.3% on average in the same period, up two percentage points from the June report.

Copyright Agence France-Presse, 2006

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