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Sentiment Of Big Japan Manufacturers Worsens
- By The Financial District
- Oct 3, 2022
- 2 min read
Sentiment among major Japanese manufacturers unexpectedly worsened for the third straight quarter in the Bank of Japan's September survey released Monday, Oct. 3, 2022, as higher raw material costs, magnified by a sharp drop in the yen, threatened to squeeze their profits despite an easing of COVID-19 supply bottlenecks, Kyodo News reported.
Photo Insert: Kawasaki Industrial Area Japan
The reading of the key index measuring confidence among companies such as those in the auto and electronics sectors fell to 8 in September from 9 three months earlier, according to the BOJ's Tankan survey.
The average market forecast was for an improvement to 11 in a Kyodo News survey. The mood among nonmanufacturers, meanwhile, improved slightly to 14 from 13 in the previous survey, up for the second straight quarter, as economic activity picked up the pace with the removal of anti-coronavirus curbs.
The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.
As Russia's war against Ukraine drags on, higher energy and raw material costs have cast a pall over the economic outlook, prompting companies to pass on increased costs to protect their profits. The yen has plunged against the US dollar, reflecting the widening interest rate differential between Japan and the US as inflation has been accelerating at different speeds.
"On balance, the data show the economy lacks vigor," said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting Co.
"The economy has emerged from the COVID-19 fallout, but there are negative factors weighing on sentiment such as rising prices, monetary tightening, and the prospect of a global economic slowdown," Kobayashi said.
Companies in the survey expect the dollar to trade at 125.71 yen on average in the current business year to March, up sharply from 118.96 yen in the previous survey. Japan carried out a currency intervention in September to arrest the yen's rapid depreciation and the dollar was trading near the 145 yen line on Monday.
