Japan Keeps Assessment, Says Companies Wary Over Yen, Europe

Japan’s government said the economy is still picking up slowly from the country’s March disaster, with companies exercising caution because of the yen’s appreciation and the euro region debt crisis.

“Firms’ judgment on current business conditions shows a small improvement, although that for large manufacturers is deteriorating,” the Cabinet Office said in a monthly report in Tokyo today. The government left its assessment unchanged for the second straight month.

The report again cited the situation in Europe as a threat to Japan’s prospects. Bank of Japan (8301) Governor Masaaki Shirakawa last month signaled the central bank is prepared to increase stimulus to counter the impact of Europe’s deepening crisis. Global economic uncertainty and a yen close to a postwar high against the dollar has prompted companies to postpone investments, with capital spending in the third quarter falling 9.8 percent from the previous quarter.

The BOJ’s Tankan large manufacturer index of sentiment fell to minus 4 in December from positive 2 in September, indicating there are more pessimists than optimists. Small enterprise sentiment improved to minus 8 from minus 11.

The government said a comprehensive package to counter the strong yen and the third supplementary budget of the fiscal year are being swiftly implemented. It dropped any mention of the record flooding in Thailand, indicating that its impact on the Japanese economy has subsided.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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