Japan's business mood worsens as costs cloud outlook

Japanese manufacturer’ business mood worsened in the three months to September and corporate inflation expectations hit a record high, a central bank survey showed, as stubbornly high material costs clouded the outlook for the fragile economy.

Corporate capital expenditure plans for the current fiscal year stayed strong, the Bank of Japan’s “tankan” survey showed, thanks in part to the boost to exporters from the weak yen.

But fears of a global economic slowdown cloud the outlook for the export-reliant economy, which is just emerging from the coronavirus pandemic.

Big manufacturers‘ sentiment was surprisingly weak as slowing global growth took a toll on the materials sector through declines in commodity prices,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“If the global economy slows further, other sectors may also see sentiment worsen,” he said.

Port

The headline index for big manufacturers worsened to plus 8 in September from plus 9 in June, falling short of a median market forecast for plus 11 and deteriorating for the third straight quarter, the tankan survey showed.

Non-manufacturers’ index stood at plus 14 in September, up slightly from plus 13 in June to mark the second straight quarter of improvement. It compared with a median market forecast for plus 13.

Big manufacturers expect business conditions to improve three months ahead, while big non-manufacturers’ sentiment was seen worsening, the survey showed.

In a glimmer of hope, big firms expect to increase capital expenditure by 21.5% in the current fiscal year ending in March 2023 after a 2.3% drop in the previous year, the tankan showed.

The survey also showed companies expect inflation to stay around the BOJ’s 2% target for years to come, underscoring growing inflationary pressure that may cast doubt on the bank’s pledge to keep ultra-low interest rates.

Companies expect inflation hit 2.6% a year from now and 2.1% three years ahead, the tankan showed. They project inflation of 2.0% five years ahead, the highest level since comparable data became available in 2014.

Japan’s economy expanded an annualised 3.5% in the second quarter as the lifting of COVID-19 restrictions boosted consumption. But many analysts expect growth to have slowed in the third quarter, as slowing global demand and rising raw material prices weigh on exports and consumption.

[Source: Reuters/Images: Flikr)

 

Related Articles

Holiday/Home Makers, Investors/Business
Information
Assuming you’ve established some key relationships with local realtors in your areas of choice, you will sooner or later come across a potential deal which will suit your criteria. The process, from here on, is quite similar to what you’d expect in any country, but with a few important differences...
Investors/Business
Information
Since Feb 2020, with the onset of the Covid-19 global pandemic, things have changed slightly - J-REITs, which tend to be far more liquid and volatile than their underlying assets due to their very nature, have been trending down significantly in their share cost to Net Asset Value (NAV) ratios...
General
Information, News
Japan's new prime minister on Sunday said the planned mass disposal of wastewater stored at the tsunami-wrecked Fukushima nuclear plant cannot be delayed, despite concerns from local residents.
General
Information, News
Japan's Ajinomoto is set to acquire U.S.-based Forge Biologics for $546 million. The deal, pending regulatory approval, is expected to be completed in December 2023. Ajinomoto plans to integrate Forge into its AminoScience platform to advance treatments for rare diseases.