Big makers’ sentiment worsens for 1st time in 2 years

April 2, 2018

Tokyo- Business sentiment among large manufacturers in Japan has deteriorated for the first time in two years, the Bank of Japan's "tankan" quarterly survey for March showed Monday.

The headline diffusion index for large manufacturers' current business conditions stood at plus 24, against plus 26 in the previous survey for December last year.

The latest survey was conducted between Feb. 26 and Friday.

A surge in raw materials costs dented confidence mainly among materials makers.

The overall sluggishness apparently reflected concerns over protectionist policies of U.S. President Donald Trump's administration, which imposed new tariffs on steel and aluminum imports from Japan and other countries in late March.

The latest DI reading was worse than the average forecast of plus 25 among the 21 economic research institutes surveyed by Jiji Press.

The DI represents the percentage of companies seeing good business conditions minus those feeling the opposite. The March survey is the first one under the new standards introduced in line with a review of sample companies.

The current DI fell 9 points to plus 10 for steelmakers and as many points to plus 26 for chemical makers.

In contrast, the index rose 2 points to plus 22 for automakers and 8 points to plus 52 for production machinery makers.

Sentiment among large manufacturers is expected to deteriorate further owing to concerns about protectionism and the yen's firmness, with the outlook DI toward June standing at plus 20.

Petroleum and coal product makers, as well as nonferrous metal makers and automakers, expect sharp deterioration in their business sentiment.

The current DI for large non-manufacturers was down 2 points at plus 23, chiefly reflecting labor shortages.

The outlook DI stood at plus 20 for large non-manufacturers.

Large manufacturers' average assumed exchange rate for fiscal 2018, which started Sunday, stood at 109.66 yen per dollar, against 110.67 yen for the previous year.

Combined capital spending at large manufacturers and non-manufacturers in fiscal 2018 is projected to rise 2.3 percent from the previous year.

Recurring profits are forecast to drop 3.2 percent for large manufacturers and 1.2 percent for large non-manufacturers.

The employment conditions DI for large manufacturers fell 5 points to minus 18, worst since November 1991, indicating deterioration in personnel shortages. The index for non-manufacturers dropped 2 points to minus 28, lowest since February 1992. Jiji Press