The Bank of Japan's latest "tankan" quarterly survey of business confidence paints a mixed picture of the Japanese economy, but worrying signs appear to outweigh the bright spots. The government's scenario of a steady recovery following the backlash against the consumption tax hike in April may be further in doubt.
The marginal increase in the business confidence index — the percentage of firms reporting favorable conditions minus that of companies reporting negative environment — among large manufacturers marks the first improvement in six months. However, sentiments among nonmanufacturers and small companies in all sectors continued to worsen.
The confidence among large manufacturers was apparently aided by the recent steep fall of the yen, which boosts the foreign currency-denominated earnings of export-oriented firms in yen terms. But the decline of the yen, which hit ¥110 against the dollar on Wednesday for the first time in more than six years, is not necessarily a boon for others.