Do you believe this?
The latest result in Japan's quarterly Tankan survey, which captures business sentiment, is less bleak than anticipated, but at least not encouraging in the sense that the sentiment index for large corporations declined for the first time in seven quarters. But as was written in this blog before, gloomy sentiment among corporations has already been predicted given a negative effect of two major factors on the economy: one is a surging yen, and the other is the expiration of government subsidies to eco-friendly cars.
What's worse is that large corporations see the demand for new products will lessen more both in domestic and foreign markets in March 2011, and hence resource slack will keep on worsening. They are also concerned that production cost will rise more than selling price, thus putting a downward pressure on the performance. You see no good news at all in the coming quarter.
In the meantime, the Tankan survey allows us to estimate a forecast figure of stock markets and the economy for the coming quarter.
The graph above shows a positive relation between the business sentiment index for all industries and the Nikkei stock index since 2000. Using a forecast figure of the business sentiment index as of March 2011, the Nikkei stock index is estimated to be 12106 in March 2011, well above today's closing price of 10303.83.
The second graph illustrates another positive relation between the index of overseas supply and demand conditions for large Japanese manufacturing firms and the yoy growth rate of real US GDP since 2001. The intuition is very simple. The more the US economy grows, the more overseas demand arises for Japanese companies. Taking this relationship into account, the US GDP is forecast to grow 0.9% annually from the previous quarter in October to November 2010 and 3% in January to March 2011. A 0.9% growth of this quarter would be lower given the currently released strong figures of US economic indexes.
What's interesting is that this positive relationship weakens if extended before 2001. One of the reasons is thought to be the increasing reliance of Japan's economic growth on exports since the start of this century. Anyway, Japanese economy might not be jubilant to the end of the coming quarter according to workaholic salarymen.
What's worse is that large corporations see the demand for new products will lessen more both in domestic and foreign markets in March 2011, and hence resource slack will keep on worsening. They are also concerned that production cost will rise more than selling price, thus putting a downward pressure on the performance. You see no good news at all in the coming quarter.
In the meantime, the Tankan survey allows us to estimate a forecast figure of stock markets and the economy for the coming quarter.
The graph above shows a positive relation between the business sentiment index for all industries and the Nikkei stock index since 2000. Using a forecast figure of the business sentiment index as of March 2011, the Nikkei stock index is estimated to be 12106 in March 2011, well above today's closing price of 10303.83.
The second graph illustrates another positive relation between the index of overseas supply and demand conditions for large Japanese manufacturing firms and the yoy growth rate of real US GDP since 2001. The intuition is very simple. The more the US economy grows, the more overseas demand arises for Japanese companies. Taking this relationship into account, the US GDP is forecast to grow 0.9% annually from the previous quarter in October to November 2010 and 3% in January to March 2011. A 0.9% growth of this quarter would be lower given the currently released strong figures of US economic indexes.
What's interesting is that this positive relationship weakens if extended before 2001. One of the reasons is thought to be the increasing reliance of Japan's economic growth on exports since the start of this century. Anyway, Japanese economy might not be jubilant to the end of the coming quarter according to workaholic salarymen.
posted by Akihiro Gotoda at
5:34 PM
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