Confidence among Japan's largest manufacturing firms is looking up

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Confidence among large manufacturing firms in Japan continued to improve in the June quarter with the Bank of Japan’s Tankan sentiment index rising to +15.

The Tankan sentiment index is derived by subtracting the number of firms which believe manufacturing conditions are poor from those who believe they are strong. A positive reading indicates optimists outnumber pessimists.

The result, higher than the +12 level of Q1, subsequently the same level expected for the June quarter, was the highest level seen since Q1 2014. Looking ahead, the outlook for confidence is expected to improve further with the gauge for Q3 rising to +16 from +10 recorded previously.

Large firms, including those from the manufacturing and non-manufacturing sectors, expect profits to increase 0.8% in the 2015/16 financial year with capital expenditure forecast to rise by 9.3%, a sharp improvement on the 1.2% contraction seen previously. Encouragingly, the increase is the largest seen since 2005/06.

The full Tankan report from the bank of Japan can be accessed here.

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