Confidence among Japan’s biggest manufacturers has jumped to its highest level in a decade, a key central bank survey showed Monday, as the world’s number three economy picks up pace.
The Bank of Japan’s tankan report — a closely watched quarterly survey of more than 10,000 companies — showed a reading of 22 among major manufacturers in its latest report, the highest since its September 2007 reading, when the headline figure sat at 23.
The latest survey handily beat market expectations for a reading of 18.
The report, the broadest indicator of how Japan Inc. is faring, marks the difference between the percentage of firms that are upbeat and those that see conditions as unfavorable.
The mood among major manufacturers — which plan to boost their capital spending — has now risen for a fourth straight quarter.
The index for nonmanufacturers came in at 23, unchanged from the previous tankan, and sitting at its highest level since the final quarter of 2015.
The upbeat survey underscores how Japan’s prospects have been improving on the back of strong exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.
“The continued improvement in business conditions in today’s tankan points to robust economic growth,” research house Capital Economics said in a commentary after the report was published.
The report came after a batch of broadly positive economic data on Friday, including better-than-expected factory output, offering up some good news for Prime Minister Shinzo Abe as he faces a national election on Oct. 22.
Abe swept to power in late 2012 on a pledge to cement a lasting recovery in the world’s third-largest economy with a growth plan eponymously dubbed Abenomics.
The scheme — a mix of aggressive monetary easing and huge government spending along with reforms to the economy — fattened corporate profits and sent the stock market higher. But it has failed in the goal of shrugging off the deflation that has plagued Japan for years and held back growth.
Household spending — seen as key for Japan’s exit from years of deflation — edged up and the unemployment rate sat at a more than two-decade low, according to Friday’s data.
But the inflation rate of 0.7 percent was still nowhere near the Bank of Japan’s 2.0-percent target, despite years of record monetary easing.
Japan’s economy expanded in the April-June period, capping off six straight quarters of gains in its longest winning streak in over a decade.
A key issue in the coming election is a planned sales tax hike in 2019.
A levy rise in 2014 hammered spending and pushed the economy into a brief recession.