Confidence among Japan’s biggest manufacturers has risen for the second straight quarter, a key central bank survey showed Monday, a welcome boost for the world’s third-largest economy.
The report comes after a batch of government data on Friday showed inflation and factory output picked up in February while the unemployment rate dipped to a two-decade low.
Japan has been struggling to mount a firm economic recovery and put years of on-and-off deflation in the rear view mirror.
The Bank of Japan’s Tankan report — a quarterly survey of more than 10,000 companies — showed a reading of 12 among major manufacturers, rising from 10 in the previous survey.
That is the strongest level since the same reading for the final quarter of 2015 report but fell short of the median forecast of 14 in a survey by Bloomberg News.
“While today’s Tankan survey showed that business conditions for large manufacturers did not improve as much as most had anticipated, the survey suggests that growth will remain strong for now,” Marcel Thieliant, senior Japan economist at Capital Economics, wrote in a note.
The report, which is closely watched for being the broadest indicator of how Japan Inc is faring, showed that businesses had estimated a weaker yen for the just ended fiscal year.
A weaker currency is positive for Japanese exporters as it makes their products more competitive abroad and inflates repatriated profits.
The average predicted exchange rate by large manufacturers for the fiscal year that ended last month was 107.30 yen against the dollar, which is weaker than the 104.90 yen forecast in the previous report.
The rate is what companies use internally for business planning and often deviates from current market exchange rates.
The companies also forecast further weakness in the currency in the current fiscal year that started Saturday. They see the Japanese currency at 108.43 to the dollar.
The yen was trading at 111.20 to the dollar on Monday, compared with 111.31 yen in New York on Friday afternoon and 111.87 yen in Tokyo earlier.
Confidence among small- and mid-sized firms also strengthened in the latest survey.
The BoJ’s report is likely to take some pressure off the central bank to launch more easing measures when its policy makers meet this month.
The yen plunged in November against the greenback on hopes for US President Donald Trump’s economy-boosting agenda.
Abe swept to power in late 2012 on pledge to cement a lasting recovery with a growth plan eponymously dubbed Abenomics.
The scheme — a mix of aggressive monetary easing and huge government spending along with reforms to the economy — stoked a stock market rally as it weakened the yen and fattened corporate profits, but the effect on the wider economy has been less dramatic.