Tokyo (awp/afp) – The morale of large Japanese industrial firms has started to rise again according to a barometer published on Monday, against a backdrop of expectations of an imminent increase in rates by the Japanese central bank, despite a downward revision of GDP in the first quarter.
Japan’s economy contracted by 0.7% between January and March, according to a third estimate released Monday, compared with -0.5% previously, an adjustment mainly due to lower public and private investment than in the previous calculation.
The quarterly Tankan barometer compiled by the Bank of Japan (BoJ), however, shows large manufacturing companies more confident about the future (+13 points) than in the previous publication at the beginning of April (+11).
The Bloomberg agency consensus economists had counted on an unchanged index.
“The morale of the manufacturing industry was maintained despite the shutdowns of automobile production and the external disruptions which had an impact on production in the first half of the year,” said Stefan Angrick in a note from Moody’s Analytics.
Vehicle shipments gradually resumed in the spring after several automakers including Toyota subsidiary Daihatsu resumed operations after they were halted following a scandal involving irregularities in approval tests in late December.
On the side of large companies in services, confidence has on the contrary fallen slightly to +33 (against +34 previously), after having reached in the previous quarter a high since 1991, while the number of foreign visitors exceeds pre-Covid levels, helped by the fall of the yen which makes Japanese prices particularly attractive.
“The rebound in foreign tourism that (previously) boosted the non-manufacturing sector is now behind us, and disappointing wage increases are dampening domestic spending in the services sector,” Angrick added.
All sectors of activity and all company sizes combined, the latest Tankan index stood at +12, unchanged compared to April.
“The Japanese economy appears fragile,” notes the economist, according to whom the BoJ could struggle to justify a rate hike this month and instead wait until September.
“As a whole, the Tankan is consistent with our opinion that the Bank of Japan will raise its key rate to 0.3% during its monetary meeting at the end of the month”, on the contrary judged Marcel Thieliant of Capital Economics.
Some 9,100 Japanese companies were surveyed between late May and late June by the Bank of Japan (BoJ) for the Tankan index.
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