A survey conducted by the Bank of Japan revealed that optimism in the Japanese services sector has risen to its highest level in 33 years, thanks to a boom in tourism and increased profits from rising prices. This maintains market expectations for another rate hike before the end of the year. The survey results are among the factors that the Bank of Japan will review during its upcoming meeting on April 25 and 26 when it releases new quarterly forecasts for growth and inflation. The April forecasts will attract market attention for any clues regarding the Bank of Japan's capacity to raise interest rates again, following its exit from a massive stimulus program last month.
The survey also indicated that large companies plan to increase their capital expenditure by 4 percent in the fiscal year starting in April, after an 11.5 percent increase in the previous year. The confidence index for major non-manufacturing firms in Japan rose to 34 points in the first quarter of this year, the highest level since 1991, according to the quarterly "Tankan" survey by the Bank of Japan. Meanwhile, the confidence index for major manufacturing companies fell from 13 points in the last quarter of the previous year to 11 points in the first quarter of this year. It is noted that the reading of the index indicates that the number of optimistic companies in the sector outweighs the number of pessimistic ones.
