Improving Japan business mood signals steady economic recovery

Companies expect to increase capital expenditure and project inflation to stay above the Bank of Japan's 2% target five years ahead, the quarterly "tankan" showed on Monday, offering policymakers hope that conditions for phasing out their massive monetary stimulus may be gradually falling into place.

The headline index measuring big manufacturers' mood stood at plus 5 in June, bouncing back from a two-year low of plus 1 hit in March in a sign firms were recovering from the hit from rising raw material costs and supply disruptions. An index gauging the mood among hotels and restaurants hit the highest level on record as removal of COVID curbs boosted tourism demand, the survey showed.Large firms plan to ramp up capital expenditure by 13.4% in the current fiscal year ending in March 2024, exceeding a median market forecast for a 10.1% rise.

Big manufacturers expect business conditions to improve three months ahead, while non-manufacturers project a deterioration on worries over high costs, the tankan showed.

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