The Bank of Japan's "tankan" survey showed on Monday that business sentiment among major manufacturers greatly improved in the April-June period, with their diffusion index (DI) at plus 4. But the Abe administration should note that the DI for small and medium-size firms is still negative — minus 14 for manufacturers and minus 4 for nonmanufacturers. Apparently small and medium-size businesses are not benefiting much from the administration's economic policy.
The Abe government also should pay attention to price increases of imported items due to a weakening of the yen caused by the BOJ's massive monetary easing. Price rises could dampen consumer spending, thus putting a brake on economic recovery.
The DI for major manufacturers rose to plus 4 in the April-June quarter, gaining 12 points from the previous quarter. The DI for that sector has entered into positive territory for the first time since September 2011. The DI is the percentage of companies with positive business outlook minus the percentage of those with negative business outlook. The cheap yen helped the DI for the car industry rise 6 points to plus 16 and that for the steel industry jump 36 points to minus 2.
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