Japanese Business Sentiment Shows Signs of Moderation and Improvement
Challenges and Optimism in Manufacturing
Business optimism among Japanese manufacturers is expected to have slightly eased in the first quarter, primarily due to disruptions in auto production. However, service-sector sentiment is on the rise, according to a recent poll of economists. The Bank of Japan’s “Tankan” survey is anticipated to reveal a slight dip in the headline big manufacturers’ sentiment index to +10 in March from +12 in December.
Caution Amid Policy Shift
The recent policy shift by the Bank of Japan, marking the first rate increase in 17 years, has raised cautious optimism. Analysts predict a careful approach as the central bank navigates potential impacts on the fragile economic recovery. The decision comes amidst concerns that further rate hikes could negatively affect the overall economic landscape.
Industry-specific Challenges and Growth
Manufacturers are bracing for challenges such as vehicle certification issues affecting supply chains. On the other hand, non-manufacturers are experiencing a surge in confidence, with the index expected to rise to +33 from +30. Large firms are also planning a significant 9.2% increase in capital spending for the upcoming fiscal year, following a robust growth projection for the current year.
Upcoming Data Releases
The Bank of Japan will unveil the Tankan survey results on April 1, shedding light on the current business sentiment landscape. Additionally, industrial output data for February is anticipated to show a 1.4% month-on-month growth. Tokyo’s core consumer inflation is projected to have a slight slowdown in March, with the government set to release industrial output and consumer inflation data on March 29.
