Tankan survey result to be re-released by Bank of Japan

The Bank of Japan will re-release the results of Tankan survey on 4 April, the bank has said.

The initial results, released on Friday, showed that manufacturers were optimistic about economic growth in the first three months of the year.

However, the majority of the responses were received before the earthquake and tsunami struck on 11 March.

The bank said it would divide the responses it received before and after the quake in the new results.

According to the initial results of the survey, the large manufacturers index stood at plus 6 for the first three months of the year, one point better than the previous quarter.

A positive reading indicates the sector is improving.

However, analysts warned that the survey did not reflect the full impact of the recent devastation as the central bank had collected the majority of responses before the earthquake and tsunami hit the country.

"With 72% of companies replying before the earthquake, its impact is barely seen in this survey, so its results, and forecasts for June are likely to prove wildly over-optimistic," said George Worthington of IFR Markets.

Looming threat

The extent of the damage to the country's infrastructure has been huge.

Some of Japan's biggest companies halted production at their factories in the wake of power cuts and shortage of parts.

Analysts say that as the full impact of the damage caused to infrastructure and supply chain becomes clear, there is likely to be a dip in manufacturers' confidence in the short term.

"IFR would expect a sharp drop back into the red, meaning pessimists outweigh optimists, particularly if power cuts continue and the rebuilding effort looks likely to be very drawn out," Mr Worthington said.

The index represents the difference between the percentage of respondents who say that business conditions in Japan are good and those who say they are poor.

Yen impact

Analysts say that while the pace and efficiency of recovery will have an impact on business sentiment in the country, a big role will also be played by how its currency moves.

Japan's economic growth has been powered by its export sector.

The movement in the yen's value has a big impact on the success of its biggest exporters.

A stronger yen not only makes Japanese goods more expensive to the buyers but also hurts the companies' profits when they repatriate their foreign earnings back home.

The yen hit record highs against the US dollar in the aftermath of the quake, prompting a joint action from the G7 nations in the currency markets.

Analysts say that given the current scenario the yen is likely to remain competitive.

"Companies predict the dollar will average 84.20 yen this fiscal year, so the key is whether it rises above 85 yen amid the recent yen weakening trend," said Ayako Sera of Sumitomo Trust & Banking.

"If the dollar averages above 85 yen, that would be a plus for exporters," he added.