Quarterly 'tankan' survey shows slight improvement as Bank of Japan weighs rate hike

A quarterly survey of major Japanese manufacturers released Monday shows business sentiment improving to its best level in four years, even after President Trump raised tariffs on goods from the US ally to a baseline level of 15 per cent.

A quarterly survey of major Japanese manufacturers released Monday shows business sentiment improving to its best level in four years, even after President Trump raised tariffs on goods from the US ally to a baseline level of 15 per cent. The Bank of Japan is bound to take the results of its quarterly "tankan" survey into account during a policy meeting this week, when it is expected to raise its benchmark interest rate. Analysts said the stronger results may sway the BOJ toward pressing ahead with a 0.25 percentage point rate hike that will take the key rate to 0.75 per cent. That expectation hit the price of bitcoin early Monday, as it dipped below USD 88,000 from about USD 92,000. Higher rates would likely lead Japanese investors to shift funds back home, sapping demand for cryptocurrencies. While the US Federal Reserve has been trimming rates to counter a weak jobs market, Japan's central bank is moving in the other direction as it contends with inflation and a weak currency. The economy contracted at an annualised rate of 2.3 per cent in July-September. Still, the BOJ survey showed the measure of major manufacturers expressing optimism rose to 15 from 14 in the last quarter, the highest level in four years. The index shows the percentage of companies reporting positive conditions minus the percentage reporting unfavourable ones. The measure of sentiment for all companies rose to 17 from 15, it said. The survey "struck all the right notes from the Bank of Japan's perspective," Abhijit Surya of Capital Economics said in a report. "It showed that business conditions are improving, profit margins remain elevated, and firms are upbeat about their investment intentions." The latest deal between Japan and the Trump administration set tariffs on its exports to the US at 15 per cent, down from an earlier plan for a 25 per cent tariff. To win the agreement, among other things, Japan promised to invest USD 550 billion in the United States. While the BOJ's overall survey showed improvement, forecasts for the next quarter were less positive, and businesses expected inflation to remain at 2.4 per cent, above the central bank's target range. The Bank of Japan has kept its key interest rate near or below zero for years, trying to spur faster economic growth by keeping borrowing costs very low. Its policymaking has been complicated by the fact that Japan's population is shrinking and ageing rapidly. That has caused labour shortages that have only slowly pushed wages higher. That should lead consumers to spend more, but increases in income have lagged behind inflation, denting their appetite for spending. Prime Minister Sanae Takaichi has pledged, as have her predecessors, to revive the economy. Last month, her cabinet approved a 21.3 trillion yen (USD 135.4 billion) stimulus package to spur growth through expansionary government spending and relieve the impact of higher prices.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)