Japan recovering?

Sydney, Oct 2, 2007 (ABN Newswire) - Trust Japan to send the rest of the world multiple messages.Its political establishment is fractured as a new Prime Minister and Government attempts to stabilise the situation, consumer spending has been mixed, real wages falling and economic growth anemic and yet the last few days has also seen positive news.Last week it was another strong performance on the trade account with the trade surplus nearly quadrupling in August from August 2006, thanks to strong exports to Europe and Asia offset a slowdown in shipments to the US. And industrial production also rose and there were signs that household spending could be rebounding.Even wages may be showing signs of rising, according to another set of figures released last week.On top of this the yen has started weakening sharply as the carry trade resumes.And yesterday, the latest Tankan measurement of manufacturers' sentiment from the Bank of Japan showed confidence remains high: in fact it isnear a two year high, despite the political instability and worries about financial stability in the US and Europe.The Bank of Japan said that the index of manufacturer sentiment stayed at 23 points in September from June, a much better performance than economists' forecasts which has plumped for a small fall.(Like all indexes of this kind, a positive number means optimists outnumber pessimists.) Japan's biggest companies said they plan to increase spending 8.7% in the year ending next March, up from June's estimate of 7.7%. They also increased their profit and sales estimates for the period and said they expected the yen would trade at just over 115 yen to the US dollar, down slightly from the current rate of just over 114 yen. The Tankan asked 10,750 companies for their views on sales, profit, spending, hiring and confidence. They were surveyed from August 28 to September. 28, meaning that it covered the period when the credit market shock was at its peak, especially in the US and Europe, and the instability in the Japanese Government also erupted.Economists don't expect any move to lift rates from the Bank of Japan, despite all the emerging positive news.The concerns about the US housing slump and subprime mess remain a dominant factor with large manufacturers' confidence forecast to fall in coming months, according to the Tankan.

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