By Toru Fujioka
June 8 (Bloomberg) -- Japan’s corporate bankruptcies dropped for the first time in 12 months and merchant sentiment climbed to a one-year high, signs that the economy is starting to recover from its deepest postwar recession.
Bankruptcies fell 6.7 percent in May from a year earlier to 1,203 cases, Tokyo Shoko Research Ltd. said in Tokyo today. The Economy Watchers index, a survey of people who deal with consumers, climbed to 36.7 last month from 34.2, the Cabinet Office said today in Tokyo, the highest since March 2008.
The yen rose on speculation an economic revival will spur demand for the nation’s assets. Industrial production and exports are improving, and Prime Minister Taro Aso’s stimulus packages have provided consumers with 2 trillion yen ($20 billion) in cash handouts as well as helped small businesses get access to credit.
“Government policy is working,” said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. “The wheels are not falling off.”
The yen strengthened to 98.46 per dollar at 2:41 p.m. in Tokyo from 98.64 late in New York on June 5. The Nikkei 225 Stock Average climbed 1.1 percent, extending its gains to 40 percent since it slumped to a 26-year low on March 10.
Exports rose 7.2 percent in April from March, the second month-on-month gain, the Finance Ministry said today. Factory production surged the most in 56 years in April and manufacturers including Toyota Motor Corp. and Canon Inc. plan to increase output in coming months.
More Confident
“Companies are starting to increase production, and that’s helping households be more confident about incomes and jobs,” said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Securities Co. in Tokyo. “Sentiment is on track to recover.”
The Economy Watchers outlook index climbed to 43.3 last month, the fifth straight gain and the highest since September 2007. A reading above 50 means optimists outnumber pessimists.
Canon last week said it will begin construction of a digital-camera factory in July. Toyota will resume overtime work this month to boost output of its Prius hybrid, public broadcaster NHK reported last month.
The government announced in April that it will expand a credit-guarantee program for small and midsized companies to 30 trillion yen ($305 billion) from 20 trillion yen. It also has expanded so-called safety-net loans to smaller companies through the state-run Japan Finance Corporation to 12 trillion yen from 9 trillion yen.
Still, some economists including former Economy Minister Hiroko Ota say a recovery isn’t sustainable because corporate profits are dwindling.
Companies slashed spending at the fastest pace in 54 years last quarter and profits tumbled a record 69 percent, the Finance Ministry said last week. The unemployment rate rose to 5 percent in April, the highest in more than five years, and about two work seekers are competing for a single spot, the most severe job shortage on record.
“The worst is over but I can’t say the economy is heading for a recovery at all,” Ota said.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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