December 26, 2007	Wednesday	Zilhaj 15, 1428

TOKYO, Dec 25: Big Japanese firms were less confident about conditions in the three months to December than in the previous quarter, a government survey showed on Tuesday, suggesting rising oil prices and financial market volatility were hurting corporate sentiment.The data did little to alter a view in markets that the central bank will delay raising interest rates until well into next year in light of financial market uncertainty and eroding growth prospects for Japan’s economy.

The government announced a package of measures on Tuesday to cushion the impact of high oil prices. It will spend 215 billion yen ($1.89 billion) on measures such as cutting highway tolls and financing help for small firms.

The Bank of Japan last week kept its key policy rate unchanged at 0.5 per cent with its governor acknowledging that underlying economic growth is slowing.Economists said Tuesday’s survey was in line with the closely watched Bank of Japan tankan issued on Dec. 14, pointed to deteriorating business sentiment.

“The survey showed companies have turned very cautious given uncertainty over the US economy and markets as well as rises in costs that they cannot fully reflect in prices of their products due to lack of strong demand,” said Yoshimasa Maruyama, an economist at BNP Paribas.

“While downgrading its view on the economy last week, the BOJ stuck to its overall economic scenario,” Maruyama said, referring to the central bank’s view on sustained growth.

“But if they decide to revise down their scenario when they review their twice-yearly outlook report in January, that would mean the BOJ also thinks a rate hike will be hard for a while.” The yen reacted little to the data in thin trade, with many markets closed for Christmas holidays.

The business survey index (BSI) on sentiment at large manufacturers in the October-December quarter was plus 5.2, compared with plus 7.7 in July-September, while that at large non-manufacturers fell to minus 2.2 from plus 5.3 in the previous quarter.

Big firms’ overall sentiment index declined to plus 0.5 against plus 6.2 in July-September, the survey showed.The BSI measures the percentage of firms that expect the business environment to improve minus the percentage that expect it to worsen. Sentiment among small firms remained weak.

Shaky financial markets, concerns over slowing US economic growth and continued price rises for crude oil and other raw materials dampened sentiment in Japan’s corporate sector, which has been the key driver behind the nation’s economic expansion.

The BOJ’s quarterly tankan showed business sentiment among big Japanese manufacturers at a two-year low.—Reuters