Forex Flash: BoJ Tankan highlights confidence – RBS

FXstreet.com (Barcelona) - As expected, the BoJ Tankan survey results released on 1 April show improvement in business confidence. This was largely boosted by a continued rise in stock prices. However, “we have yet to see full recovery in business confidence, given the deterioration in confidence among SMEs and a sharp rise in input costs as opposed to only a limited improvement in output prices.” notes Junko Nishioka, Chief Economist at RBS. Stock prices continue to rise at an accelerated pace, but in our view the markets might have become too optimistic about economic recovery.

Having said that, we believe that today’s Tankan survey results will be an important factor in BoJ’s monetary policy decisions this week and beyond that. No matter how much the business confidence improves, we think the BoJ will proactively enhance its accommodative monetary policy with the goal of beating deflation as early as possible.