Major Japanese manufacturers — riding high from a booming Asia — haven’t felt this good in two years.
A key central bank report released yesterday showed business confidence among Japan’s biggest manufacturers improved for a fifth straight quarter, thanks to Asia’s rapid rebound from the global recession, which has bolstered demand for the country’s exports of consumer gadgets, cars and other goods.
The Bank of Japan’s quarterly tankan survey of business sentiment showed the main index for large manufacturers stood at 1. Three months ago it hit minus-14.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable. The higher the number, the better the mood.
The result beat Kyodo news agency’s average market forecast of minus-3 and was the first reading in positive territory since June 2008.
The improvement in confidence suggests the recent turmoil in financial markets has not affected the real economy much, said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
It has “reassured our view that recovery remains intact,” Adachi said in a commentary.
The latest tankan results lend support to the Bank of Japan’s assessment that the world’s second-biggest economy is enjoying a moderate recovery.
Big companies surveyed by the tankan indicated they planned to increase capital investments by 4.4 percent this fiscal year through March next year. The forecast is a significant reversal from last year’s 17 percent decline.
Japan’s most well-known brands have announced fatter capital spending plans for this fiscal year. Toshiba Corp is looking to spend US$14 billion over the next three years to amplify its strengths in semiconductors and nuclear power. Honda Motor Co expects a 50 percent jump in capital investments in the year through March next year after slashing such spending by 45 percent last year.
The good news, however, was tempered by other details that reflect emerging worries about Europe’s debt problems and ongoing caution about the sluggish domestic economy. Companies forecast marginal improvements in sentiment in coming quarters and employers report that they still have too many workers. Businesses of all sizes expect to slash hiring of new graduates by 24 percent this year, the tankan showed.
“Companies are pretty cautious given the European sovereign risk issues and appreciation of the yen and also the decline in equity markets,” Barclays Capital’s Japan economist Kyohei Morita said. “It’s really hard for companies to continue to improve their sentiment going forward.”
Data last week showed while Japanese export growth is still robust, it has slowed every month since February. Other government reports revealed moderating factory output and household spending, an unexpected rise in the country’s unemployment rate and more falling prices.
The mood among big non-manufacturers climbed to minus-5 from minus-14 in December, according to the tankan.
Small and medium-size enterprises also reported higher numbers, though their business conditions continued to lag because large manufacturers have been the main beneficiaries of export growth. The confidence index for medium-size manufacturers rose to minus-6 from minus-19 three months ago. The small manufacturers’ index stood at minus-18 from minus-30.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a