Japan Report Shows Recovery Not Complete

Japan’s leading manufacturers are more optimistic about their prospects now and are looking ahead, yet the economy hasn’t improved enough to benefit non-manufacturers and smaller companies, a central bank survey showed. The Bank of Japan’s quarterly tankan survey of 708 businesses showed the sentiment index among major manufacturers was 7. That’s an increase from 2 in March. A positive number indicates that more companies are optimistic about their prospects, while a 0 indicates that they’re evenly split. The index remained over the boom-bust line of 0 for a second straight quarter, as large manufacturers were able to export more to offset slower sales at home. Domestic-bound non-manufacturers and smaller companies were hurt more from the 2-percentage-point rise in the consumption tax that has sent sales of automobiles, homes and electronics tumbling, the report indicated. The central bank appears unlikely to raise interest rates until the recovery strengthens to include smaller companies. However, that recovery is still at least a year away, according to analysts.