Japanese Business Confidence Index Soars

Japanese business confidence rose to its best level in nearly three years, adding to indications that the central bank may raise interest rates as early as this month. The Bank of Japan’s quarterly tankan index of large manufacturers’ sentiment rose to +3 in June from -9 in March. That’s the first time since September 1997 that the index is positive, which means more manufacturers are optimistic about the economy than pessimistic. Business confidence has been improving for 18 months as the economy has clawed its way back from recession. Combined with a better outlook for spending on factories and equipment, rising confidence could encourage companies to pay workers more and, in turn, kick-start consumer spending. A plus reading on the main index shows the proportion of companies that are upbeat outnumber those that are pessimistic. The main index was in the red for 2 1/2 years. With the economy now growing and deflation less of a threat, BOJ Governor Masaru Hayami has made it clear he wants to raise rates for the first time in a decade. He has said the BOJ can abandon its 16-month-old policy of holding borrowing near zero once policymakers are confident prices have stopped declining and consumers are beginning to spend.