Big manufacturers have more confidence in Japan`s business conditions than they have had for a decade as global demand adds momentum to economic recovery, a closely watched central bank survey showed on Monday.
The upbeat data supports Bank of Japan policymakers` hopes that a sustained economic recovery will boost wages and household spending, helping to accelerate inflation towards the central bank`s ambitious 2 percent target.
The Bank of Japan "tankan" survey could also help premier Shinzo Abe as he tries to convince voters in an Oct. 22 election that his "Abenomics" stimulus policies have improved their livelihoods, analysts say.
"The results were stronger than expected. Big manufacturers` sentiment was probably driven by a weaker yen and hefty corporate profits," said Yuichiro Nagai, economist at Barclays Securities Japan.
Nagai said companies were somewhat cautious on the outlook, but there was room for improvement.
That was because the expected yen rate was set higher than the current rate, which could help companies raise their profits if the actual rate ended up lower than the expected rate, he added.
The BOJ`s quarterly "tankan" survey showed the headline index for big manufacturers` sentiment stood at plus 22 in September, handily exceeding a median market forecast of plus 18 to mark the highest level since September 2007.
It was higher than plus 17 seen in the previous survey in June, posting a fourth straight quarter of improvement, the tankan survey showed on Monday.
The big non-manufacturers` sentiment index stood at plus 23, unchanged from June and matching a median market forecast, the survey showed.
Big firms expect to increase capital expenditure by 7.7 percent in the current fiscal year ending in March 2018, compared with a median market forecast for a 8.
Both big manufacturers and non-manufacturers expect business conditions to deteriorate in the next three months, according to the survey, reflecting their concerns about uncertain outlook.
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