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Economy

Corporate confidence worsens, but views mixed on further BOJ easing

TOKYO -- Uncertainty over China's economy and a worsening outlook for Japan has depressed business confidence among big Japanese manufacturers, according to the Bank of Japan's latest Tankan survey.

     Many market participants fear Japan will fall into a recession in the July-September period, but views are mixed on whether the BOJ will move ahead with further monetary easing. Two market analysts weigh in with their views on the results of the quarterly poll on business confidence.

BOJ easing now unavoidable
Yasunari Ueno, chief market economist at Mizuho Securities

The thing to focus on in the latest survey is the fact that nearly all industries project that business conditions for the next three months will deteriorate. While strong earnings are helping buoy short-term business confidence, looming uncertainties over the Chinese economy are weighing heavily on corporate sentiment. There is a high probability that capital investment will decline more than usual in the latter part of this year.

     With the outlook for the BOJ's 2% inflation target looking grimmer than ever, the central bank is bound to downgrade its forecasts for economic growth and inflation. I predict the BOJ will act on Oct. 30, when it releases its Outlook for Economic Activity and Prices report.

Expectations of further easing tail off
Shingo Ide, chief equities strategist at NLI Research Institute

The September Tankan was not as bad as I expected. Although there are concerns about whether companies will actually stick to their plans, the fact that they upgraded their capital investment forecasts for the second half of this year was a surprise. The Tankan findings have slightly reduced expectations of a BOJ easing.

     When you look at individual stocks, there are reasons to be optimistic. Even without further monetary easing, there is a chance the Nikkei Stock Average will reach the 20,000 mark by December.

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