Japan Manufacturing Confidence on the Rise

Confidence in the Japanese manufacturing sector seems to be on the rise as the Bank of Japan’s quarterly Tankan headline index rose by one point to plus-13 in September, outperforming market forecasts for a plus-10 reading with a positive reading showing that optimists outnumber that of pessimists.

The Tankan survey is followed quite closely by businesses and the financial community as it is often seen as a key indicator of growth within the country and this positive news will be music to the ears of many as Japan looks to fight its way out of the economic doldrums.

The reading followed poor data that showed that industrial output had dropped but manufacturers are confident that this is just a minor blip and the country will soon be selling its goods across the globe again.

In part this is because of Japanese Prime minister Shinzo Abe’s stimulus plan which is aimed at weakening the yen, so that Japanese goods would be cheaper for other countries, and encouraging consumers to spend more however this has been struggling due to the implementation of a sales tax designed to contend with the considerable fiscal deficit and as such it is a delicate balancing act.

As the world’s third largest economy, if Japan can start moving ahead again it will be major news for potential investors as well as employers and the people of Japan and it is thought that Mr Abe is keen to raise the sales tax again.

Richard Jerram, chief economist at the Bank of Singapore said of this prospect:

“Increasing the sales tax has really hurt the economy, so raising taxes more when the economy is weak is not an attractive idea. But they need to find some fiscal prudence and to tackle the budget deficit, If three years into Abenomics the economy is not good enough to accept a small tax increase, then you’re essentially admitting that Abenomics has failed.”

Japan has had good news as of late with both exports and wages on the rise which have aided the economy significantly. Japanese exports rocketed up from a year previously to 6.38tn yen ($60bn; £38bn) which means there has been a rise of around 6.9%. The weak yen has managed to bring down the price of Japanese goods sold abroad which means foreign consumers have been more inclined to purchase Japanese goods.

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