‘Japan business sentiment improving’

TOKYO (AP) ― Japanese manufacturers are more upbeat about business conditions than they were late last year, but less so than expected, a central bank survey found.

The Bank of Japan’s “tankan” index for the March quarter rose to minus 8 from minus 12 for large manufacturers, a smaller improvement than analysts had anticipated before Monday’s release. A reading below zero means pessimists outnumber optimists, and the tankan forecast for large manufacturers for the June survey was minus 1.

Large firms said they plan to reduce capital spending in the fiscal year that begins Monday by 2 percent, suggesting manufacturers may be unconvinced lax demand is on the rebound, despite aggressive stimulus measures by the government and central bank.

Large nonmanufacturing companies were more positive, at positive 6, up from 4 in December. Smaller nonmanufacturers were less optimistic, at minus 8, up from minus 11 in the previous survey.

The central bank will hold its first policy meeting under a new governor, former Asian Development Bank President Haruhiko Kuroda, later this week. The weak business outlook could spur fresh moves to ease monetary conditions, possibly by increasing BOJ asset purchases or extending the range of maturities for the government bonds it buys.

“It is a near certainty that at least one of the two Board meetings in April will result in some form of additional monetary easing,” Capital Economics said in a commentary issued before the tankan’s release.

While increased government spending and monetary easing appear to be giving the economy a boost after years of stagnation, economists say longer-term reforms are needed to counter weakening demand due to Japan’s aging and shrinking population and excess capacity.