More Japanese companies felt business was better in March than at any time in almost seven years, a closely watched Bank of Japan report showed today, a further sign a recovery is spreading throughout the economy.
But a rising yen clouded the outlook, with firms in the BOJ's quarterly "tankan" corporate sentiment survey cautious in their forecasts for the coming three months.
The survey's diffusion index (DI) for large manufacturers improved to plus 12 in March from a revised plus 7 in December, above the median forecast of plus 10 in a Reuters poll and the highest outcome since June 1997, when the index was plus 13.
The survey showed improved confidence among non-manufacturers and small firms, confirming the recovery is broadening out beyond exporters, who have enjoyed strong demand for electronics, cars and other goods in fast-growing neighbour China.
Sentiment among big non-manufacturers was plus 5, the highest since May 1992, better than December's revised zero and above the poll forecast of plus 4.
Retailers' sentiment turned positive in March, a sign that consumer spending, which accounts for about 60 percent of the economy, is catching up with the recovery. Business services, real estate and other service industries were also more optimistic.
The tankan's indices measure business sentiment by subtracting the percentage of companies reporting unfavourable conditions from those that say they are favourable.