Japan economy powers ahead as China wobbles

Asia’s manufacturing titans were subject to contrasting fortunes today: Japan’s biggest firms were buoyed by rising optimism but China was hit by a credit squeeze and falling orders.

Japan’s closely watched Tankan survey offered more signs that prime minister Shinzo Abe’s programme of monetary stimulus and public spending are boosting the economy, although he faces more of a battle to push through the so-called “third arrow” of reforms economic reforms.

Business sentiment among major Japanese manufacturers turned positive for the first time in nearly two years. But Berenberg Bank’s chief UK economist Rob Wood said: “Abe needs to make sure the third arrow — structural reform — flies straight and true.”

China’s wobbles continued as firms were hit by a shortage of credit and slowing orders from the West. New export orders suffered their sharpest decline in nine months, HSBC said. Forecasters warn the squeeze could send Chinese growth below 7% in the coming quarters — its weakest performance since the Nineties.