Signs of optimism emerge in Japan's ailing economy

BUSINESS CONFIDENCE in Japan was slightly less depressed in the latest quarter, indicated a key survey. The news yesterday boosted share prices, but the Bank of Japan said it was too soon to conclude that the economy had hit bottom.

The Nikkei 225 share index climbed 45 points to 16,334.78, but the yen weakened. In the US, Wall Street opened strongly, with the Dow up by 77 points at 9,909.65 by mid-morning.

Japan's quarterly Tankan survey showed the first rise in business sentiment in Japan for two years, with companies predicting further improvement by June. Confidence was still subdued, however, with balances of minus 47 in manufacturing and minus 34 in non-manufacturing, showing that pessimists far exceed optimists.

Shosaku Murayama, head of the Bank of Japan's research department, said: "Plans for sales, fixed investment and employment remain quite cautious, but business sentiment improved slightly and is expected to continue improving."

The government reacted cautiously. Hiromu Nonaka, a spokesman, said: "There are brighter signs, but we still need to be vigilant on the economy."

The survey revealed plans for steep cuts in investment, despite anticipating rising profits. Double-digit profit growth is likely to be accompanied by a near 10 per cent drop in investment spending in 1999/2000.

Kevin Hebner, a strategist at Credit Suisse Asset Management in Tokyo, said: "This type of bad news is good news. It is a way to measure how corporations are getting serious about restructuring."

Other data showed a 3.8 per cent real fall in household spending in the year to February.