Japan’s large manufacturers were losing optimism for the first time in more than six years as the government mulled measures to prop up the economy, according to a survey released by the Bank of Japan (BOJ) ahead of its meeting next week.
Sentiment among Japan’s biggest product makers slid to 0 from 5, according to the bank’s quarterly tankan survey released yesterday.
Economists forecast a reading of 3. Confidence has now weakened for four consecutive quarters, with the drop to zero indicating there are now as many pessimists as optimists.
Photo: AP
The results of the survey, which are mainly from the latter half of last month, show the depth of concern among large manufacturers at that time about business conditions amid an uncertain global outlook and the fallout from October’s sale tax hike and a destructive typhoon.
However, the report also contained some positives.
Sentiment at large companies outside the factory sector held up better than expected and capital spending plans edged up from the previous quarter.
“The results show companies are cautious about the impact of the tax hike,” Mitsubishi UFJ Morgan Stanley senior economist Hiroshi Miyazaki said, citing larger-than-expected falls in recent consumption data.
The US-China trade negotiations were also compounding their outlook, he said.
Still, resilience in the service sector suggests the damage from the global slowdown is still largely contained to Japan’s manufacturers.
The service industry has been a key prop for overall growth in the economy this year. Longer term, there are reasons for optimism.
Along with signs of progress in US-China trade talks, the stimulus package launched last week by Japanese Prime Minister Shinzo Abe administration’s has raised the nation’s growth prospects for next year, even if the situation in the current quarter remains challenging.
Economists surveyed by Bloomberg forecast that the economy would shrink by an annualized 2.6 percent this quarter, as the higher sales tax crimps consumer spending and production contends with a continued global slowdown and October’s super typhoon.
About 70 percent of businesses had responded to the survey by Nov. 27, according to the BOJ, long before the government’s announcement of the ￥13.2 trillion (US$122 billion) of fiscal stimulus, though it was known a package was in the pipeline.
“Capital spending remains strong and that means the BOJ can still stick to its view for a moderate recovery,” economist Hideo Kumano at Dai-ichi Life Research Institute said. “It’s likely that the BOJ will stand pat next week.”
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