The latest survey confirms the solid nature of corporate activity and provides hard evidence that the Japanese economy continues to grow modestly, after having emerged from a soft period.
This sounds ironic, but the growing need for fresh labor and investment are now weighing on profit trends, together with high levels of commodity prices.
A strategic shift to value-added products and the past sweeping restructuring efforts have helped improve the profit-generating capacity at Japanese firms, allowing them to easily absorb such negative factors as rises in crude oil prices and increases in personnel cost.
Although private sector inventories surged again, I am not that worried because Japanese companies are now very sensitive and quick to respond to any such negative development.
Today's data confirmed the continued upsurge in Chinese demand, which had slowed during late 2004 and early 2005, as well as firm demand in the US, so Japanese exports are most likely to maintain brisk gains in the near term.
Given the continued improvement in labor and wage conditions of late and the likelihood that that will be sustained, consumer spending is most likely to lead the current economic growth until the present cycle ends.
The survey also underscored the fact that smaller firms are also catching up with large-sized firms in terms of improvement in business sentiment.
Some Japanese companies, such as automakers, are now even benefiting from higher crude oil prices, as they boost demand for fuel-efficient vehicles made by Japanese makers.
Heavy investments by Japanese firms, aimed at boosting their overseas operations and businesses, are now beginning to yield huge returns for them and this trend will not come to an end in the foreseeable future.
