Wednesday, October 20, 2021

Japan’s business mood improves, strong demand, post-Covid recovery expected

TOKYO – Japan’s business mood improved for the fifth straight quarter in September, with manufacturers relied on strong global demand, a central bank survey showed on Friday, the next step to lift the economy out of recession. Good for the administration’s bid.

Steady progress in vaccinations and hopes of a reopening in economic activity also helped lift the mood of non-manufacturers, the survey showed, underscoring the Bank of Japan’s approach to ending the state of emergency restrictions. consumption will increase.

But manufacturers expect trade conditions to worsen three months ahead as parts shortages and Asian factory closures disrupt production, the survey showed, underscoring the fragile nature of Japan’s export-dependent recovery. .

“Automakers sentiment turned negative, which is negative. But this is offset by strength in electric machinery and capital expenditures due to continued expansion in global IT demand,” said Takumi Tsunoda, senior economist at the Shinkin Central Bank Research Institute.

“Supply shortages are affecting wide areas with parts of Asia in short supply,” he said. “Disruptions to domestic production could extend beyond automakers.”

According to the Bank of Japan’s (BOJ) Tankan survey, the headline index stood at plus 18 in July-September, up from plus 14 in the previous quarter and higher than the market forecast for plus 13.

The large non-manufacturers price index rose from plus 1 to 2 in June, beating an average market forecast to a flat reading and improving for the fifth consecutive quarter.

The survey bodes well for Fumio Kishida, who will replace Prime Minister Yoshihide Suga next week with a mandate to revive the economy and distribute more money to households.

While most companies had sent replies by September 10, the survey did not factor much into the government’s decision to lift the state of all coronavirus emergency on Thursday.

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Still, retailers, restaurants and hotels were less depressed about business conditions three months ago, reflecting expectations of an economic reopening, the survey showed.

A BOJ official told a briefing that some large firms in sectors such as steel and oil saw an improvement in the situation due to progress in passing on higher costs to their customers.

Tanken’s indices saw more companies rise in both input and output prices, suggesting that rising raw material costs could gradually outpace consumer inflation.

Large companies are expected to increase capital expenditure by 10.1 per cent in the current fiscal ending March 2022, the survey showed, supporting the BoJ’s outlook. Strong corporate sector activity will offset some of the weakness in consumption.

The survey will be one of the factors when the BoJ meets on October 27-28 for a rate review and revises its quarterly growth and inflation projections.

“The BOJ continues to focus on corporate profit and capital expenditure plans,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Given these metrics … the BOJ will probably maintain its forecast of a moderate recovery,” she said.

However, analysts gave some worrying signs. Supply disruptions weighed on the sentiments of major automakers to minus 7, the lowest level since December 2020.

The survey showed that sectors such as steel makers and small parts makers are likely to decline in the coming months.

Production disruptions due to slowing Chinese growth and Asian factory closures led to a slowdown in Japan’s manufacturing activity in September, and were a topic of discussion among BOJ policymakers at a recent meeting.

By Tetsushi Kajimoto and Leika Kihara

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This News Originally From – The Epoch Times

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