Confidence slips among Japan’s big manufacturers
TOKYO: Confidence among Japan’s largest manufacturers slipped after rising for three straight quarters but they remain positive, a key survey showed Monday. The Bank of Japan’s Tankan poll showed business confidence declining in March to a reading of plus 11, down from plus 13 three months earlier.
The poll reports the difference between the percentage of firms that are upbeat and those not, with a positive figure meaning more businesses feel optimistic. The headline figure was slightly higher than market expectations of plus 10, and came after hitting plus 13 in December. Meanwhile, optimism grew among non-manufacturers, to plus 34 from plus 32, in the eighth-straight quarterly improvement. It compares with market expectations of plus 32. Big firms expect to increase capital expenditure by 4.0 percent in the fiscal year starting in April, after a 11.5 percent rise in the previous year, the survey showed.
An index measuring job market tightness showed companies of all sizes faced labor shortages, heightening prospects that wage hikes will broaden, analysts say. Companies also expected inflation to stay above the BOJ’s 2 percent target one, three, and five years ahead, the tankan showed.
“The employment index underscores a tight job market and corporate inflation expectations remain high,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute. “The BOJ should be able to raise rates one more time this year, and possibly twice,” he said. There are uncertainties, however, on the outlook. Both big manufacturers and non-manufacturers expect conditions to worsen three months ahead, according to the survey.
Some companies worried about global economic uncertainty and prospects of rising labor costs due to a tight job market, the BOJ official said. An earthquake in Japan on January 1, a halting of production by Toyota subsidiary Daihatsu and the slowing Chinese economy “seem to have been weighing on production activities,” economist Tatsuhiko Nakanobu at Mizuho Research and Technologies said in a statement before the release.
Looking ahead, confidence among major manufacturers will likely improve thanks to a recovery in the semiconductor market, but concerns over the European, US and Chinese economies will weigh, Nakanobu said. Japan narrowly avoided a technical recession in the second half of 2023 but economists say the world’s fourth-largest economy remains in the doldrums.