Japan business mood improves, but global stress dims outlook: Poll

TOKYO - Japanese manufacturers’ business confidence improved for the first time since August while the services sector mood rose for a second month, according to the Reuters Tankan poll, which also highlighted a challenging outlook amid a patchy economic recovery.

The monthly poll mirrored a similar improvement seen in the third quarter in the Bank of Japan’s (BOJ) closely watched quarterly Tankan survey.

The latest Reuters Tankan, however, pointed to a tough quarter ahead even as confidence perked up in November with manufacturers’ mood expected to hold steady over the coming three months while services sector morale was seen deteriorating.

In the Reuters poll of 502 large and mid-sized companies, in which half of them responded on condition of anonymity, many businesses complained about higher import costs of raw materials and deterioration of Japan’s key markets such as China.

The weak Japanese yen

has been a major driver of cost-of-living pressures as it boosts the price of imported goods, while the broader economy has also been hampered by slow global growth, sharply higher rates abroad and geopolitical tensions pushing up the price of commodities.

The sentiment index for manufacturers stood at plus 6, up two points from the previous month, led by vehicles and food processors, according to the survey conducted between Oct 24 and Nov 2.

The index is expected to stay flat in February.

The services sector index grew to plus 27 from plus 24 in October, led by retailers, information and communications, and other services.

The index is expected to fall to plus 21 over the coming three months, boding ill for domestic consumption which has failed to fire up despite the end of Covid-19 curbs earlier in 2023.

Data on Tuesday showed consumer spending fell for the seventh month in a row in September, suggesting a recovery in household consumption is some time away.

Analysts expect Japan’s economy, the world’s third biggest, to have shrunk in the third quarter, the first contraction in four quarters, according to a Reuters poll.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists. REUTERS