Japan Merchant Sentiment Rebounds After Record Drop
Confidence among Japanese merchants rose for the first time in three months in December, rebounding from the previous month’s record drop.
The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 35.4 from 33.9 in November, the Cabinet Office said today in Tokyo.
Government stimulus spending and renewed demand from abroad helped pull Japan from its deepest postwar recession last year. While exports to Asia will probably ensure the recovery is sustained, companies that depend on domestic consumers will struggle to contribute until wages climb, said Kyohei Morita, chief economist at Barclays Capital.
“Businesses still can’t afford to stop cutting costs,” Tokyo-based Morita said before today’s report was released. “It’s still too early for incomes to start rising.”
Aeon Co., the country’s largest supermarket operator, posted a net loss of 9.93 billion yen ($108 million) for the nine months ended November, the company said last week. Large service firms expect their profits to tumble 10.5 percent in the year ending March, following a 27.6 percent drop the year before, the Bank of Japan’s Tankan survey showed last month.
The yen traded at 92.23 per dollar at 2:09 p.m. in Tokyo from 92.20 shortly before the report was released.
The merchant index’s seven-point drop in November was the biggest since the survey began in 2000, according to Bloomberg data. A measure of the outlook for confidence climbed to 36.3 last month from 34.5.
Falling Wages
Shrinking profits have suppressed wages for 18 months and sapped winter bonuses, which are often equivalent to several months of pay. Large businesses cut the bonuses by 15 percent to 755,628 yen ($8,200), the steepest drop since the survey began in 1959, the Japan Business Federation said last month.
Employers are also reluctant to hire, leaving every 100 job seekers to compete for only 45 positions.
Other reports today added to evidence that the recovery is relying on demand from abroad as spending slumps at home. Exports fell the least in 14 months in November, helping the current-account surplus expand to 1.1 trillion yen, the Finance Ministry said. Meanwhile bank lending declined for the first time in four years in December as companies pared expenditure, Bank of Japan figures showed.
Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen emergency package on Dec. 8 to prevent the economy from slipping back into a recession, adding to more than 20 trillion yen in stimulus injected by the previous administration that was ousted by his Democratic Party of Japan in August. Hatoyama’s plan supplements measures already implemented, including incentives to purchase cars and household appliances.
“The stimulus is there to prop up the economy until corporate profits recover enough to lift the job market, said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. “So far, I think the measures have been successful in doing so.”
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