MOF Outlook Survey Shows Upbeat Large Manufacturers
Japan's Ministry of Finance outlook index paints a positive assessment of the economy and especially for the outlook over the next two quarters. The reading for large enterprises across all industries did backtrack for the current quarter to 4.8 from 5.8, but the bellwether manufacturing reading for large enterprises improved to 5.7 from 5.4. The headline was dragged down by nonmanufacturing where the net index fell to 4.4 in the fourth quarter from 6.0 in the third quarter.
The standing for the current reading for large enterprise manufacturing is at its 66th percentile just barely in the top two-thirds of historic observations back to 1990. That's the same relative standing for the quarter ahead outlook; however, for the quarter after that that percentile standing jumps to its 95th percentile. Whatever hesitation is present in the current ranking it is not souring expectations for the next two quarters.
Nonmanufacturing large enterprises have a current quarter standing in the 78th percentile with the quarter ahead assessment at its 80th percentile and the quarter after that at its 81st percentile. On balance, these are all strong readings for this survey and are led forward by the bellwether large manufacturer’s outlook.
Large manufacturers are generally taken as the bellwether in this survey.
For conditions in the general economy, we find the assessments substantially lower than for business conditions in the current quarter. General domestic economic conditions declined to 7.4 in the fourth quarter for all industries across large enterprises from 13.3 in the third quarter. Manufacturers’ response fell to 5 from 10.8 while nonmanufacturing fells to 8.5 from 14.5. These are substantial setbacks for the general economy-reading quarter-to-quarter. The percentile standings for general conditions similarly are weaker than for business conditions with large enterprises having an overall standing in their 72nd percentile but that moves up to a 78th percentile for the quarter ahead into the 81st percentile for the quarter after that. The bellwether large manufacturers have a very moderate 57.6 percentile assessment of the current quarter, a value that's only marginally above the historic median back to 1990. However, for the quarter ahead the assessment picks up to the 69th percentile and for the quarter after that it picks up to about the 85th percentile – quite strong. Nonmanufacturers see the general domestic economy response with a ranking in its the 75th percentile standing. That steps up to an 81st percentile standing in the quarter ahead and backs down to a 76th percentile standing expected for the quarter after that.
Large enterprise employment has much stronger standings overall. For all industries for manufacturing and for nonmanufacturing in the current quarter, the quarter ahead, and the quarter after that all have percentile standings in their 90th percentiles. In fact, all but one of the readings are at the 95th percentile or higher. The outlook for Japan’s labor market is quite strong. These strong readings also permeate medium enterprises for their current quarter as well as the quarter ahead and the quarter after that. For small enterprises they similarly have 90th percentile standings for all industries across all quarters with the exception of manufacturing where small enterprise manufacturers have assessments between the 76th and 81st percentiles; still, these are not weak they're just not as strong as for the larger firms.
Summing up On balance, there are weaker business readings for large enterprises in the current quarter although medium-sized enterprises and small enterprises tend to show either more strength or less weakness. Bellwether large manufacturers are undaunted as their business conditions response improves. For the general economy, enterprises of all sizes see weakening in the fourth quarter compared to the third quarter; that assessment is widespread. However, the current conditions for employment show small improvements across all industry and all sizes of enterprises. Of course, the outlook quarters carry strong readings relative to their historic norms. The MOF survey is not in denial about some of the recent troubles the Japanese economy has encountered, but it remains upbeat on the future.
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
More Economy in Brief
