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Last Updated: Thursday, 4 March, 2004, 06:24 GMT
Optimism grows within Japan Inc
Tokyo, Japan
Japanese prices continue to slide
Japan's businesses are betting on a brighter future, new figures show.

For the second straight month, the Ministry of Finance business sentiment index has stayed in positive territory.

The data, economists say, indicates that growth in the last quarter of 2003 - the best for 13 years - should carry through to 2004.

But the strength of the yen remains a concern, meaning that small firms with a domestic focus were more optimistic than larger exporters.

Yen effect

The 5.1 reading for business sentiment about the first three months of 2004 was a slight pullback from the 5.3 in October-December.

And few would deny that after more than a decade in the doldrums - and with sky-high public debt, stubborn deflation and heavy bad debts at the banks - the Japanese economy has a long way to go yet.

Still, this is the first time the number has stayed above zero for two successive quarters in more than two years.

The stock market responded accordingly, with the benchmark Nikkei 225 index up almost 0.5%.

More to come?

And the recent slight fall in the value of the yen after months of appreciation against a weak dollar means things may be looking even better, economists said.

"If the polling took place now, with the yen pulling back and the stock market moving higher, I think the result would be very different," said Mamoru Yamazaki of Barclays Capital in Tokyo.

"If you look at the April-June forecast, it's much better."

In a separate survey also out on Thursday, the Ministry of Finance said business investment was on the up, rising 5.1% in the fourth quarter from a year earlier.

The rise is the third in succession, and accompanies news of a near-17% gain in corporate profits.

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