Japan Business Confidence Rises Again

Japanese business confidence rose for a second quarter to its best in a year amid gathering signs that government efforts to crank the economy to life are meeting with success.

The Bank of Japan’s quarterly tankan index showed fewer companies were pessimistic than three months ago. The widely watched index of large manufacturers’ sentiment registered minus 37 in June, an improvement over minus 47 in March. Economists had expected an index reading of minus 36.

June’s survey shows that state spending on public works, loan guarantees to save small firms from bankruptcy and moves to repair Japan’s banks have bolstered confidence within boardrooms. Growth is tied to the government spigot, according to executives, and the tap needs to stay on lest the recovery falter.

“The economy will probably recover in the latter half of this fiscal year,” Hiroshi Okuda, chairman of Toyota Motor Corp., said in an interview. “Provided more money is allocated for public works, the economy will probably grow 0.5% this year.”

A brighter outlook, coupled with better earnings prospects, may ease pressure on companies to lay off workers and cut wages. With their jobs looking more secure, consumers may begin to spend more, helping speed recovery. Consumer spending accounts for about 60% of the economy and has been the missing ingredient in the government’s recipe for growth.