Japan's trading partners may be slowing down, but companies and the central bank are becoming more optimistic. Even with the financial turmoil being experienced in Europe, strong exports to Asia are keeping the wheels spinning.
Japan's trading partners may be experiencing a slowdown, but companies and the central bank in the world's No. 2 economy have become more optimistic.
A Bank of Japan survey last week showed large manufacturers with their best business confidence in two years, while the BOJ is expected to revise up its own growth forecast soon.
The central bank would hike GDP to a 2.5 percent growth forecast in the current year, up from an earlier 1.8 percent, based on strong exports to Asia that have boosted factory output.
Worries remain such as the eurozone debt crisis, along with the strength of the U.S. and Chinese economies, but the government has already hiked its own expansion view to 2.6 percent from 1.4 percent.
Japan's economy grew faster than Europe and the U.S. in the first quarter, but signs that export strength may be moderating have emerged.
On Monday, a senior BOJ official said Europe has made little progress in dealing with its problems and it would take time for market confidence to return.
Even with the forecast upgrade, some analysts say the central bank may keep its overall assessment unchanged, eyeing the rising yen and falling share markets.
The yen is near a seven-month high against the dollar, sending shares of Japanese exporters to multi-month lows last week.