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June Survey by Bank of Japan
Shows Substantial Improvement in Business Sentiment

The Bank of Japan on July 1 announced the results of its short-term survey of business sentiment in enterprises in Japan for June. This statistical survey, known as the Tankan report, is conducted quarterly in March, June, September, and December every year to provide an accurate picture of business sentiment among companies in Japan, including both listed companies and small and medium-sized enterprises. As the survey method, the Bank of Japan sends questionnaires to enterprises, which return their answers to the bank by post or online. The survey questions, which are used as statistical data for gauging business sentiment, cover such items as general business conditions, inventory levels of finished goods and merchandise, changes in the selling prices of major products and services, semiannual and annual results, forecasts of total sales and business income, capital investment plans, workforce (including part-time workers), and financial conditions.

This time 99.0% of the 10,623 enterprises surveyed responded, with replies being accepted from May 28 to June 28. In the case of large manufacturing companies, the diffusion index (DI),* a core indicator of business sentiment, was plus 4 points, showing an improvement of 12 points from the previous survey in March. This was the first time for the DI for these companies to move into the positive zone since the September 2011 survey, 21 months ago, when it reached plus 2.

It is believed that the business sentiment of enterprise owners has improved due to such factors as the depreciation of the yen, higher stock prices, and the recovery of the US economy. The depreciation of the yen in particular has played a major role in boosting the business sentiment of large manufacturing companies.

Nevertheless, in the case of small and medium-sized manufacturing enterprises, which account for 99.7% of the total number of Japanese enterprises, although registering an improvement of 5 points from the previous survey, the DI was still only minus 14 points. For these companies, the situation clearly remains severe.

While appreciating the economic policies of the present government to a certain extent, RENGO (Japanese Trade Union Confederation) believes that the employment and working conditions of ordinary people remain damaged and are not improving and that betterment of the livelihood of ordinary people is essential in order to shake off deflation and revive the economy.

In its policy and system demands and proposals for the fiscal 2014-15 period (July 2013 to June 2015), RENGO is conducting activities aimed at the integrated promotion of both economic and industrial policies and employment policies with a view to the recovery of a solid middle class in Japan.

*Diffusion index (DI): The DI is the core Tankan indicator of business sentiment. It is calculated by subtracting the percentage of enterprises responding "unfavorable" to the question about business sentiment from the percentage responding "favorable." So if all enterprises replied "favorable," the DI would be 100, and if the percentages for "favorable" and "unfavorable" were the same, the DI would be 0. When the DI is positive, business sentiment is judged to be upbeat.

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