Big manufacturersʼ sentiment hits 11-year high

December 15, 2017

TOKYO- Business sentiment among large manufacturers in Japan is at its highest level in 11 years, backed by brisk overseas demand and strong equipment investment at home, a key quarterly central bank survey showed Friday.

In the Bank of Japan's December "tankan" survey, the headline diffusion index for large manufacturers' current business conditions rose to plus 25 from plus 22 in the previous September survey, up for the fifth straight quarter and posting its highest reading since December 2006.

The latest result beat the average forecast of plus 24 in a Jiji Press poll of 19 economic research institutes.

The DI represents the percentage of companies seeing good business conditions minus that of those feeling the opposite.

By sector, sentiment sharply improved among makers of production machinery, including chipmaking equipment and construction machines.

The automotive, information technology and construction sectors were also buoyant, along with steelmakers and nonferrous metals producers on the back of higher commodity prices. But sentiment worsened among makers of timber and other wood products.

For large nonmanufacturers, the current business conditions DI was unchanged at plus 23, with the hotel and restaurant sector hit by typhoons and other bad weather conditions, as well as struggling with labor shortages.

The business outlook DI toward March 2018 stood at plus 19 for large manufacturers and plus 20 for large nonmanufacturers, both falling short of the current figures amid uncertainties over North Korea and the Middle East.

Shunsuke Kobayashi, an economist at the Daiwa Institute of Research, said, "Rising labor costs and a slowing Chinese economy are expected to weigh on corporate earnings in Japan."

Yasunari Ueno, chief market economist at Mizuho Securities Co., said that if the trend of a continued interest rate increase and high stock prices in the United States is reversed, "a shock will spread globally." Jiji Press