Written by Satoshi Kajimoto
TOKYO (Reuters) – Business confidence among Japan’s major manufacturing and service sector companies fell in April from a month earlier, a Reuters monthly poll showed, due to cost-of-living pressures and a decline in demand in China, its main market. It is dragged down by a stable economic situation.
According to a Reuters Tankan survey, the yen has weakened to levels not seen since the height of the asset expansion bubble in 1990, raising import costs and hurting household consumption.
Additionally, the study found that while exports increased due to the impact of the autumn currency, shipment volumes did not benefit much.
The Reuters Tankan Sentiment Index for the manufacturing sector was at +9, down from 10 in the previous month due to the impact of chemicals and food processing.
The service sector index fell to +25 from +32 in the previous month, despite a slight increase in retail trade. The survey was conducted from April 3 to 12 and found that sentiment indicators for both sectors improved slightly over the next three months.
The monthly Reuters Tankan, which closely tracks the Bank of Japan’s quarterly Tankan survey, was conducted at a time when the Japanese currency had hit a 34-year low, exceeding 153 yen against the dollar. For this reason, authorities have repeatedly warned that they are prepared to take action against speculative or destabilizing currency movements. The dollar exceeded 154 yen this week.
A manager at a chemical manufacturer said on condition of anonymity, “Sales seem to be increasing due to the weaker yen, but there are no signs of a recovery in terms of volume.”
Reuters Tankan surveyed 497 major Japanese non-financial companies, of which 235 responded during the survey period.
“Japanese companies as a whole may be on a roll towards raising wages, but rising prices are reducing consumer appetite for purchases of food, household goods and other items,” a manager at a chemical company wrote.
In addition to weak domestic demand, external factors for Japanese companies are also cited as a cause for concern.
“Demand is unstable due to uncertainties such as the slow economic recovery in China and the decoupling of the U.S.-China economy,” a manager at a paper and pulp manufacturer said on condition of anonymity.
The previous Tankan, released by the Bank of Japan on April 1, showed that optimism in the services sector reached a 33-year high for the first quarter, driven by increased profits from inbound tourists and rising prices. Shown. But that was offset to some extent by the survey’s finding that sentiment toward large manufacturers fell for the first time in four quarters.
Data on Monday showed Japan’s core machinery orders, a key indicator of capital spending, rebounded sharply in a welcome sign for domestic demand.
But overall economic momentum so far this year suggests there is insufficient demand in the economy to spark a strong recovery in the near term. This is one reason why the Bank of Japan has taken a cautious approach to further monetary tightening following last month’s landmark decision to end negative interest rates.
The Reuters Tankan Index is calculated by subtracting the percentage of pessimistic respondents from the percentage of optimistic respondents. A positive number means optimists outnumber pessimists.
(Reporting by Satoshi Kajimoto; Editing by Shri Navaratnam)
