Japanese business confidence among large manufacturers reached a near two-year high in the December quarter, as revealed by the Bank of Japan's ‘Tankan’ survey. This suggests favourable conditions for reducing extensive economic stimulus measures. The survey also highlighted that large non-manufacturers' sentiment reached levels not seen since 1991, alleviating concerns about weak consumption hampering economic recovery. Marcel Thieliant, Head of Asia-Pacific at Capital Economics, argued that the Tankan results provide a compelling case for the Bank of Japan to reduce ultra-loose monetary policies due to indications of a tightening labour market. The headline index for major manufacturers’ sentiment increased to +12 from +9 three months ago, exceeding expectations and marking the highest level since March 2022.
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