TOKYO, Feb 13 - Defying a rising yen, a Japanese government index of business sentiment rose to its best level in more than seven years in the last quarter of 2003 but the data showed a repeat performance was unlikely in the months ahead. The Economic and Social Research Institute, an arm of the Cabinet Office, said its business survey index came in at plus 17 for the period compared with plus six in the preceding quarter. The reading for the index -- derived by subtracting the percentage of firms saying economic conditions were negative from those saying they were positive -- was the best since a plus 18 reading in a survey for April-June 1996.
The brighter mood is in line with a slew of recent data showing that the Japanese economy is emerging from a decade-long slump, led by strong demand for exports. A poll on Thursday showed economists expect data due next week to show that Japan's economy grew at an annualised rate of 4.6 percent in the final quarter of 2003, a faster rate of growth than that of the United States. But in a sign that business sentiment may be peaking, the survey's responses on the outlook showed the index falling to plus 16 in January-March and plus 12 in April-June. The survey also showed that while the index for overseas demand hit plus 16 in October-December -- the highest since comparative figures were introduced in April-June 1984 -- it was expected to fall for the next two quarters. A Cabinet Office official said responses did not seem to be affected in a major way by the recent strength in the yen, which some worry will slow Japan's recovery. A strong yen threatens to dent exporters profits when converted into yen and may hurt the competitiveness of Japan's products on international markets. The report also showed that capital spending rose 2.1 percent in the October-December quarter from a rise of 2.9 percent in July-September. The survey was conducted on December 25, eliciting responses from 4,030 companies.//