Japanese Business Confidence Rises

Confidence of Japanese manufacturers held steady in June while the service-sector mood rebounded from the prior month, an encouraging sign for the economy as it tries to hold its ground in the face of soft exports and weakening consumption.

The readings in Thursday’s Reuters Tankan poll – which strongly correlates with the Bank of Japan’s key tankan quarterly survey – reinforce policymakers’ confidence that the world’s third-largest economy can weather the pain of a recent national sales tax increase.

Still, the BOJ may face renewed pressure for additional stimulus if the weakness in exports persist, threatening to derail a recovery which kicked in last year following near two decades of economic stagnation.

In a speech on Thursday that underscored some of the uncertainties ahead, BOJ board member Yoshihisa Morimoto warned of risks to the export outlook as demand in emerging Asian markets fail to gather momentum.

He said there were “both downside and upside risks” to the BOJ’s projection that exports will rebound, depending on how overseas economies perform.

“We must continue to scrutinise the outlook for emerging economies, as well as developments in Europe’s debt problem and the U.S. economy,” Morimoto told business leaders in Akita, northeastern Japan.

His comments follow data on Wednesday which showed Japan’s exports fell for the first time in more than a year, hit by a drop in shipments to Asia and the United States.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza