Business confidence gauged by the diffusion index (DI) among major manufacturers climbed for the fifth straight quarter in June to plus 1, up 15 points from March — the first positive figure since June 2008 — the Bank of Japan said Thursday. The DI has now reached the level it was at before the global financial crisis started in the fall of 2008. Brisk exports to emerging economies like China and India have helped.
The DI is the percentage of firms reporting favorable business conditions minus the percentage reporting an unfavorable view. In fiscal 2010, major manufacturers and nonmanufacturers plan to increase capital investment 4.4 percent over that in 2009. This trend is helping some companies that depend on domestic demand. For example, the DI for major nonmanufacturers has improved for five straight months to minus 5.
There is little reason for excessive optimism, as the DI for medium-size and small firms remains low — minus 18 for manufacturers and minus 26 for nonmanufacturers. Although the DI for major manufacturers three months from now is plus 3 and that for major nonmanufacturers is minus 4, pitfalls lie ahead.