December 15, 2017 8:57 am JST  (Updated December 15, 2017 11:41 am JST)

Japan's business sentiment hits 11-year high: BOJ Tankan survey

Employment conditions worsen to 25-year low

KENTARO IWAMOTO, Nikkei staff writer

This month, Japan's corporate sentiment hit its highest level since December 2006.

TOKYO -- Business confidence among Japan's big manufacturers improved for the fifth straight quarter in the three months through December as global economic sentiment picked up, according to the Bank of Japan's quarterly Tankan survey, released on Friday.

The short-term economic survey of enterprises also revealed that more companies feel they have a shortage of staff.

The key index for large manufacturers' sentiment stood at 25 in December, up 3 points from the September survey's 22 and hitting its highest level since December 2006 when the index marked 25.

The index is calculated by subtracting the percentage share of enterprises responding "unfavorable" from those responding "favorable."

December's reading is above the median estimate of 23 from the predictions of 20 research institutes compiled by QUICK as of Dec 8.

This is the longest streak of positive business sentiment since the March 2013 survey through the March 2014 survey, the last time corporate sentiment improved for five quarters in a row.

"Exchange rates remained fairly stable and global sentiment improved until the collection reference date (Nov. 29), by when roughly 70% of the responses are typically collected," economists at Barclays wrote in a Friday report.

The index for companies in the nonferrous metals industry rose 17 points to 40 in December, while that for production machinery companies increased 10 points to 46.

Sentiment among non-manufacturers stood at 23, the same figure as in September.

But while business confidence has improved, a labor shortage is increasingly looming over the country.

The index of employment conditions, calculated as "excessive" minus "insufficient," for big corporations declined 1 point to minus 19 in December, marking the lowest reading since the March 1992 survey (minus 24).

Medium- and small-sized companies felt the burden more severely; their employment conditions indexes stood at minus 33 and minus 34, respectively, in the latest survey.

Marcel Thieliant, Senior Japan Economist at Capital Economics, wrote in a Friday report that the latest employment indexes suggest the country's unemployment rate will fall below 2.5%. Japan's unemployment rate in October was 2.8%.

The December Tankan survey was conducted between November 14 and December 14, receiving responses from about 10,000 companies.

The survey also asked companies for their outlook on business conditions. The large manufacturers index was 19, or 6 points lower than December, suggesting companies feel less confident on their outlook due to the labor shortage and other factors.

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