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. Last Updated: 07/27/2016

Japan Cheered by Manufacturer Data

TOKYO -- Giving a rare glimmer of hope to Japan's limping economy, the Bank of Japan announced Monday that confidence at recession-hit manufacturers improved slightly during the past three months, bouncing back from record lows.

In a closely watched quarterly report, the central bank said business sentiment at small manufacturers had improved since the last survey to minus 53. Medium-sized manufacturers were also more optimistic, with sentiment there improving to minus 48.

The survey measures the percentage of firms seeing business conditions improve minus the percentage seeing conditions worsen.

In the previous report, sentiment at small companies was at minus 56 and that at medium-sized companies at negative 52, the lowest level for both categories since the bank began compiling the "tankan'' survey in 1967.

For large manufacturers, the confidence measurement fell to a negative 47, down from negative 49 in December. The December figure was the worst since February 1994.

Manufacturers also predicted that business sentiment would show more improvement by the time of the next survey.

The report suggested that the government's massive economic stimulus measures were beginning to break Japan's economic slide, but analysts said the survey still revealed glaring weaknesses in corporate sentiment.

In particular, they said predictions by big companies that capital spending would decline by 9.4 percent this fiscal year - up from projections of a 5.4 percent drop for the last fiscal year - indicated that domestic demand was unlikely to recover anytime soon.

The capital spending figure was "worse than most people expected and it really drives home the fact that companies continue to retrench aggressively," said Kenneth Landon, a strategist at Deutsche Bank.

"If companies aren't spending, then the people who work there won't spend either," he added.

Economists surveyed by Dow Jones Newswires had anticipated a bigger rise in confidence among large manufacturers, forecasting a minus 45 in the central bank's latest poll.

The tankan report was accompanied by other economic data that indicated continued struggles for the Japanese economy.

Japan's Management and Coordination Agency announced that average household spending tumbled 3.8 percent in December, further dimming hopes for an upswing in consumption.

Meanwhile, the country's Economic Planning Agency said that the February index of leading indicators of the economy stood at 42.9, below the boom-or-bust threshold of 50.0 for the second straight month.

Nevertheless, many analysts took any improvement in corporate sentiment as a positive sign for the economy.

"The data confirm that the economy has begun to bottom and that its outlook is expected to improve," said Masatoshi Sato, manager of the investment information group at Kankaku Securities.

The bank changed its tankan format starting with this survey. It sampled 9,433 companies and classed them as large, medium-sized and small. Before, small- and medium-sized businesses were surveyed together.

The improving numbers come as Japan struggles with its worst recession since World War II. Unemployment has risen to all-time highs, bankruptcies have soared, consumer spending has shriveled and growth continues to decline.