By Keiko Ujikane and Masahiro Hidaka - Apr 2, 2012 6:56 AM GMT+0700
Sentiment among Japan’s largest manufacturers failed to improve in March, undermining signs of a rebound in the world’s third-largest economy.
The quarterly Tankan index was unchanged from minus 4 in December, the Bank of Japan said today in Tokyo. That was less than the median estimate of 25 economists surveyed by Bloomberg News for a reading of minus 1. A negative number means pessimists outnumber optimists.
Stagnant sentiment indicates a weakening currency and gains in stock prices this year may not be enough to bolster corporate activity as exporters struggle to regain ground lost to overseas rivals when the yen surged to a postwar record in October. Sony Corp. (6758) more than doubled its annual loss forecast, while Panasonic Corp. (6752) and Sharp Corp. predicted record losses.
“It’ll probably take more time before the effects of weakening yen and rising stocks spill over into corporate sentiment,” Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former BOJ official, said before the report. “There may be many companies that are still holding onto severe views on earnings that suffered a blow from the yen’s appreciation in late 2011.”
A government report last week showed that industrial production unexpectedly dropped in February. Policy makers are counting on reconstruction spending after last year’s earthquake and tsunami to help propel the rebound from a contraction in 2011.
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Gross domestic product may expand an annualized 1.7 percent last quarter after a 0.7 percent contraction in the final three months of last year, according to the median estimate in a Bloomberg News survey of analysts.
The Japanese currency hit a post-World War II high of 75.35 against the dollar in October, eroding profits of exporters earned abroad and jeopardizing their competitiveness. The yen has retreated from its high after the Bank of Japan expanded monetary stimulus on Feb. 14.
Sony, Japan’s largest electronics exporter, said in February that it predicted its loss in the year ended on March 31 would widen to 220 billion yen, more than double its previous estimate. Panasonic, Japan’s biggest appliance maker, also widened its annual net-loss forecast to a record 780 billion yen, it said in February. Sony earned 70 percent of its revenue outside Japan and Panasonic 48 percent.
Weakness in business confidence may increase the chance that the BOJ will consider expanding its asset-purchase program, Dai-Ichi Life Research’s Kumano said.
BOJ policy board members are scheduled to meet April 9-10 and April 27 this month. The central bank held off from expanding asset purchases at its meeting in March as it monitored improvements in the economy. It expanded bond purchases by 10 trillion yen and set a 1 percent inflation goal in February. Consumer prices excluding fresh food rose 0.1 percent in February.
To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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