Confidence among Japanese manufacturers slipped in September from a three-year high on worries about a slowdown in emerging markets, although the fastest growth in exports since late 2010 suggested the economy is still building momentum.
Prime Minister Shinzo Abe's reflationary policies and central bank stimulus weakened the yen through much of the first half of 2013, and exports look to be benefiting from that as demand starts to pick up in major economies.
But the weaker yen also increased the import bill and pushed the trade balance into a 14th successive deficit in August, matching a record streak in 1979/80 and suggesting the old export-led model of growth needs to be reviewed.
"I cannot foresee an end to trade deficits, although exports will continue to pick up due to a weak yen and improvement in Europe," said Takuya Hoshino, economist at Dai-ichi Life Research Institute.
"Business sentiment was down reflecting slowdown in emerging economies and the impact of a weak yen boosting import costs, but still it is at high levels. Today's data confirms an economic recovery continuing towards early next year."
A monthly Reuters poll, which is strongly correlated with the Bank of Japan's tankan poll, showed sentiment among manufacturers fell to plus 12 in September, its lowest since May, from a three-year high of 16 in August.
