Japanese business sentiment unexpectedly improved in September, the Bank of Japan's Tankan survey showed. The Japanese index of business activity is the best proof of the fact that companies are gradually overcoming the aftermath of the recent sales tax hike. The government led by the Prime Minister Shinzo Abe raised the rate of sales tax to 8 percent from 5 percent in April. Some local manufacturers have not recovered after the consequences of the changes in the tax legislation yet, but in general, the situation is stabilizing. The key index measuring what Japan's big manufacturers think of the present economic conditions rose to plus 13, according the September survey, up from plus 12 in the June poll. The results were a pleasant surprise as the vast majority of analysts predicted the maximum reading of 10. "It's a surprise," said Hideo Kumano, executive chief economist at Dai-Ichi Life Research Institute. "But rather than saying that the economy is picking up, it's fair to say that the downturn is coming to a halt." Major companies are closely watching the situation. They are mostly interested in the average value of the dollar in the current fiscal year that ends next March. The preliminary estimates suggest the reading of 100.73 yen. This is significantly lower than the current value of 109.73 yen meaning that exporters are likely to get much bigger profits if the current rates continue. The dollar exchange rate jumped by 5.5 percent against the yen last month, thus also contributing to an increase in stock prices. Big companies raised their investment plans to a 8.6% increase from a 7.4% rise. Their forecasts were the highest since September 2007.
