The Bank of Japan’s Tankan survey this week will probably show large manufacturers were optimistic about the economy’s recovery before the nation’s most powerful earthquake on record struck the northeast region.
The quarterly index of sentiment for large manufacturers was at 5 points in March, unchanged from December, according to the median forecast of 19 economists surveyed by Bloomberg News. The bank’s soft deadline for the survey was March 11, the day of the magnitude-9.0 quake and ensuing tsunami. More than half of companies surveyed typically respond by the first deadline and a positive reading means optimists outnumber pessimists.
The natural disaster has killed more than 10,000 and spurred power shortages and radiation leaks, curbing growth in an economy that had just started to show signs expanding after contracting last quarter. Toyota Motor Corp. and Sony Corp. are among manufacturers that have halted production because of the quake, whose damage is estimated by the government to swell to as much as 25 trillion yen ($306 billion).
“We don’t think this survey will fully reflect the impact of the earthquake,” said Ryohei Kasahara, an economist at Daiwa Institute of Research in Tokyo. “The actual state of corporate sentiment is weaker than what the Tankan will show.”
The survey, conducted Feb. 24 to March 31, will be released at 8:50 a.m. on April 1 in Tokyo. Forecasts by analysts surveyed by Bloomberg News ranged from minus 3 to 8.
A positive reading adds to evidence that the economy was rebounding, which may cushion the impact of the disaster. Reports yesterday showed the unemployment rate unexpectedly declined to 4.6 percent in February from 4.9 percent and sentiment among small companies rose to 49.5 in March, close to a four-year high.
“These figures pre-date the full impact of the earthquake but they do suggest that the economy may have had a bit more positive momentum before the disaster than we had thought,” said Julian Jessop, chief international economist at Capital Economics Ltd. in London.
The temblor has caused a plunge in Japanese stocks and sent the yen to a post-World War II high against the dollar, prompting the first coordinated currency intervention by Group of Seven nations in more than a decade. The BOJ also doubled its asset-purchase program to 10 trillion yen on March 14, increasing the funds injections into the financial system.
Prime Minister Naoto Kan’s government is considering scrapping corporate tax cuts for the year starting April 1 to raise funds for reconstruction efforts.
Sentiment to Fall
The Tankan survey will show large manufacturers forecast confidence to fall to 2 in June, analysts predict. The outlook reading would be at minus 26 points if the impact of the earthquake and the tsunami were fully reflected, according to Credit Suisse Group AG, a level not seen since 2009 after the global financial crisis.
“Even if production is expected to recover eventually on reconstruction demand, anxieties forego optimism as it’s still unclear to what extent production facilities have been damaged and when power supply will be restored,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse in Tokyo.
Auto sales in Japan’s eastern region may have dropped as much as 40 percent after the earthquake and tsunami that forced companies to halt production, Toshiyuki Shiga, the chairman of Japan Automobile Manufacturers Association, said on March 25.
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