Sunday, April 1, 2012

Japan Tankan Confidence Not Improving, Threatens Rebound

By Keiko Ujikane and Masahiro Hidaka - Apr 2, 2012 8:51 AM GMT+0800

Sentiment among Japan’s largest manufacturers failed to improve in March as executives predicted the yen will rebound against the dollar, hurting exporters' sales and profits.

The quarterly Tankan index was unchanged from minus 4 in December, the Bank of Japan said today in Tokyo. That was less than the median estimate of 25 economists surveyed by Bloomberg News for a reading of minus 1. A negative number means pessimists outnumber optimists.

Sony said in that it predicted its loss in the year ended on March 31 would widen to 220 billion yen, more than double its previous estimate. Photographer: Akio Kon/Bloomberg

A weakening currency and gains in stock prices this year are giving only a limited boost to confidence as exporters struggle to regain ground lost when the yen surged to a postwar record in October. Today’s report showed that executives expect the sentiment index to remain negative at minus 3 in June and the yen to strengthen about 6 percent from today’s level to average 78.14 per dollar this fiscal year.

“The Tankan signals business managers think it will take awhile for the economy to regain momentum,” Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former BOJ official. “They’re still concerned about the risk of the yen appreciating again because they’ve been traumatized by a strong currency.”

The yen weakened 0.3 percent to 83.12 per dollar as of 9:33 a.m. local time. The Nikkei 225 Stock Average rose 0.9 percent after reports of stronger-than-forecast consumer sentiment and spending in the U.S.
Sony, Panasonic

Sony Corp. (6758) more than doubled its annual loss forecast, while Panasonic Corp. (6752) and Sharp Corp. predicted record losses.

A government report last week showed that industrial production unexpectedly dropped in February after previously rebounding as disruptions from flooding in Thailand faded away. Policy makers are counting on reconstruction spending after last year’s earthquake and tsunami to help propel a rebound from a contraction in 2011.

Gross domestic product may have expanded an annualized 1.7 percent last quarter after a 0.7 percent contraction in the final three months of last year, according to the median estimate in a Bloomberg News survey of analysts.

The Japanese currency hit a post-World War II high of 75.35 against the dollar in October, eroding profits of exporters earned abroad and jeopardizing their competitiveness. Expanded monetary stimulus by the central bank on Feb. 14 aided weakening.
Monetary Policy

Sony, Japan’s largest electronics exporter, said in February that it predicted its loss in the year ended on March 31 would widen to 220 billion yen, more than double its previous estimate. Panasonic, Japan’s biggest appliance maker, also widened its annual net-loss forecast to a record 780 billion yen, it said in February. Sony earned 70 percent of its revenue outside Japan and Panasonic 48 percent.

Weakness in business confidence may increase the chance that the BOJ will consider expanding its asset-purchase program, Dai-Ichi Life Research’s Kumano said.

BOJ policy board members are scheduled to meet April 9-10 and April 27. The central bank held off from expanding asset purchases at its meeting in March as it monitored improvements in the economy. It expanded bond purchases by 10 trillion yen and set a 1 percent inflation goal in February. Consumer prices excluding fresh food rose 0.1 percent in February.