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TOKYO -- Starting this weekend, millions of people in Japan will gather under the blossoming cherry trees for hanami, which literally means to "gaze at flowers." There is little gazing, however. The revelers will spend most of their time tossing back beers and sake, taking turns on the portable karaoke player and, if they get drunk enough, telling the boss what they really think of him.

Occasionally, however, they will look up and everything -- the seventh rendition of "Imagine," the sotted co-workers, the trash strewn everywhere -- will fall away. The blossoms are everything they are said to be.

For the traders and investors scattered beneath the trees, a blossoming economy will surely be the hot topic. Though Japan officially slipped back into recession when its economy shrank for a second consecutive quarter in the June to September period, the mood in Tokyo has lately been upbeat. The

Nikkei

is back above 20,000, and there has been talk that Japan's most closely watched economic report will come in well.

The

Bank of Japan

Monday releases the

tankan

, its survey of corporate sentiment. It's expected to show an improvement in how corporate managers view the general business environment. The diffusion index -- which is basically optimists minus pessimists -- for large manufacturers is expected to be minus 9, an improvement over the minus 17 of the previous survey.

"The March

tankan

will further support the view that the economy is recovering

since housing starts have rebounded, exports remain strong, production continues to rise and profits are up," says Peter Morgan, economist at

HSBC Securities

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.

What this means for equities is quite simple. Stocks will rise, possibly through the key psychological resistance of 21,000 next week due to the improved economic outlook. And there's enough cash around, since about 5 trillion yen ($47.4 billion) is expected to pour into stock mutual funds over the next few months after 10 trillion yen in fixed postal savings deposits matures in April.

What's more important than an upbeat corporate mood, however, is whether consumer spending will improve, warns Yasunari Ueno, chief market economist at

Fuji Securities

. Even though he expects the outlook for the June

tankan

to significantly improve -- so much so that the diffusion index for major manufacturers could turn positive -- he says he can't get bullish on the economy if consumers don't open their wallets.

Many agree. Because consumers are worried about their economic future, they have continued to cut back on spending. And spending accounts for about three-fifths of gross domestic product.

Moreover, the

tankan

is expected to create some short-term volatility in the currency market. If the economic outlook for Japan improves, the yen will strengthen against the euro and the dollar, something Japanese government officials don't want to see. When the yen gets stronger, many exporters' profits get pinched because the products they sell overseas become more expensive. To stop this, dealers expected the BOJ to intervene. Though many expect it will buy dollars, there are some who say the central bank will intervene in the euro first.

This would weaken the yen and also help EU officials, who, it's been rumored, have asked the BOJ to intervene on their behalf, to kick-start a comeback for the struggling euro. Moreover, "Japanese institutional investors are also looking to buy up the euro to invest in European securities now that the new fiscal

2000 year begins," says Arihide Kato, currency salesman at the

Bank of America

.

If the BOJ does indeed intervene, no doubt EU officials are going to want to toast their Japanese counterparts underneath the cherry trees. The only problem is, the effect of currency interventions hardly lasts, just like the cherry blossoms that fall soon after the open.