Manufacturers upbeat in Japan

Confidence among Japanese manufacturers has recovered to its highest level since the global financial crisis hit, as strong exports to resurgent Asian markets raise hopes of a steady global recovery, a Reuters poll showed yesterday.

The Bank of Japan (BoJ), which wraps up a two-day rate-setting meeting on today, will likely decide to continue monitoring economic improvements and hold off on new policy initiatives while keeping interest rates near zero to help Japan out of deflation.

"Asian economies have proved to be stronger than previously thought with no signs of a slowdown yet to emerge. That supports projections that the global economy will continue to recover," said Masamichi Adachi, a senior economist at JPMorgan Securities Japan. "This gives a good reason for the BoJ to hold off on new policy initiatives. But the BoJ is in no position to scurry to unwind its unconventional easing policies because deflation is deeply entrenched in Japan and worries about the yen's increase persist," he said.

Responding to separate questions about growth and prices, half of Japanese firms said they expect domestic goods and services prices to fall for the next six months, as weak demand pushes the economy into deflation.

 

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