Japanese big manufacturers’ business confidence soured for the second straight quarter in the three months to June, a central bank survey showed on Friday, hit by rising input costs and supply disruptions caused by China’s strict COVID-19 lockdowns.
But big non-manufacturers’ mood improved in April-June, the “tankan” quarterly survey showed, suggesting that service-sector firms are shaking off the drag from the pandemic as the government lifts curbs on activity.
The tankan’s headline index gauging big manufacturers’ mood slipped to plus 9 in June from plus 14 in March, hitting the lowest level since March 2021. It compared with a median market forecast of plus 13.
Big non-manufacturers’ sentiment index improved to plus 13 in June from plus 9 in March. It compared with a median market forecast of plus 14.
Both big manufacturers and non-manufacturers expect business conditions to remain largely unchanged three months ahead, the tankan showed.
A Reuters poll projected the index for big manufacturers to return to plus 14, while the index for non-manufacturers was seen rising to plus 17.
Big companies expect to increase capital expenditure by 18.6% in the current fiscal year ending in March 2023, compared with a median market forecast for a 8.9% gain.
Japan’s economy likely stalled in the current quarter as China’s strict COVID lockdowns, soaring raw material costs and supply chain disruptions hurt factory output. Data on Thursday showed output fell the most in two years in May.
Policymakers are hoping that consumption will rebound from the pandemic’s drag and offset the weakness in manufacturing activity. But the yen’s recent plunge is pushing up prices of imported fuel and food, adding pain for retailers and households.
The tankan will be among data scrutinised at the BOJ’s upcoming rate-setting meeting on July 20-21, when the board produces fresh quarterly growth and inflation projections.
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