Business Confidence Up In Japan

Friday, 1 September 2010

Business confidence rose in Japan in the most recent quarter, with a majority of businesses predicting better times in the coming days and months ahead. The Bank of Japan released the figures, which take in to account the views of 11,000 business in Japan - to give a reliable picture of the state of the exporting economy.

The print came in at 8.0 - which is up 7 points from the previous figure of 1.0. Anything above 0 is considered to be a "positive" print, because it means that on the whole, there are more businesses which are optimistic than there are negative outlook businesses. In an economy the size of the Japanese, optimism is extremely important as it can not only drive the business of the company - but also improve staff morale and therefore productivity.

Considering that at the peak of the economic downturn in Japan the business confidence survey had a printed figure of -58, you can see that the economy has definitely seen an improvement in sentiment over the past few quarters.

Still though - 8.0 is a relatively reserved opinion. The major risk for businesses at present - especially exporters - is the continual appreciation of the Yen. This is a very tricky position for many business to find themselves in - because on one hand the higher USD/JPY allows them to import parts and raw materials at a lower cost, but then again lowers the overseas return of selling the finished goods on the world market.

Overall, the net effect to business in Japan is not the total appreciation of the Yen, but a fraction of it - as a result of this added cost efficiency that they receive in the process. Nevertheless, businesses ultimately would like to see a fall in the Yen, and the optimism statistics go some way to showing how improbable many people think that that might be.

The Prime Minister of Japan - Naoto Kan, has been quoted a number of times as saying that the desirable level for the USD/JPY at the end of 2010 would be around the 105.00 mark. Whilst he said this during his reign as Finance Minister for the country - many investors and commentators believe that this is still a level that he is eyeing, and further intervention might be performed to aim for this level by year end.