Japan: Tankan Large Manufacturers Index Higher, Confirming Small Recovery
The Bank of Japan’s Tankan survey for the first quarter of large manufacturers in major industries brought welcomed news for the Japanese economy. The Tankan Survey for Q1 taken between February 24th and March 31st reported higher than previous numbers for the Large Manufacturers Index and the Non-Manufacturing index. Large manufacturing came in at 6, with consensus at 5 and previous quarter at 5. Non-manufacturing data came in at 3, higher than the consensus of 2 and previous 1. The Japanese yen was relatively unchanged against the US dollar immediately after the report, most likely due to the stronger influence of US employment reports tomorrow.
Chart generated with FXCM Strategy Trader
The Tankan Survey comes on the heels of across-the-board higher numbers for large industries, including manufacturing and construction reported over the previous month, confirming expectations of a rise of economic activity in Japan, especially centered on larger cities. Tokyo condominium sales, overall industrial production, vehicle production, housing starts and construction orders during the same period all showed considerable improvement from previously reported data. The Large Manufacturers Index is currently near its post-recession highs.
Chart generated with Bloomberg Professional L.P.
Sentiment change and effects on industry from the Tohoku Earthquake on March 11 is unclear, as the Bank of Japan reports 72% of businesses responded before that date, with 23.6% replying after. Reported outlook from the survey was flat at 2, with consensus at 2 and previous -2, again with the effects of the earthquake unclear. Large manufacturing was led by higher inventories of industrial goods and heavy machinery, largely for the domestic market, offsetting the decline in exports from the stronger yen.
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