Japan's Factory Mood Highest Since Late 2018, Reuters Tankan Survey Shows

Japanese manufacturers' business confidence rose in July to hit a more than two-and-a-half-year high, as the country's export-driven recovery remained intact thanks to solid global demand, the Reuters Tankan poll showed, Daniel Leussink reported for Reuters.

But in a worrying sign, service-sector sentiment turned pessimistic, as firms struggled with the fallout from the coronavirus crisis, according to the poll, which tracks the Bank of Japan's (BOJ) closely watched tankan quarterly survey.

"The global economy is showing signs of recovery from the impact of the coronavirus pandemic," a manager at a machinery maker wrote in the poll. "But the outlook remains uncertain, as our customers are putting off business spending decisions because their budgets are on a declining trend."

The Reuters Tankan sentiment index for manufacturers rose to 25 from 22 in June, its highest since November 2018, the poll conducted June 30-July 9 showed.

The service index fell to minus 3 from a flat reading the prior month.

The Reuters Tankan index readings are calculated by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.

Manufacturers' sentiment got a boost from strong confidence at car, chemical and metal products makers, which offset negative conditions in the textiles and paper sector.

The poll, which surveyed 503 large- and mid-sized companies of which 257 firms responded on condition of anonymity, comes ahead of the BOJ's July 15-16 policy meeting. The Bank of Japan's own "tankan" business survey out this month also showed business confidence improved to a two-and-half-year high, while service-sector sentiment turned positive for the first time in five quarters.

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