Japan’s Business Confidence Improves in Q2

18 June 2021

    Business confidence among Japan's large manufacturers likely improved in Q2 thanks to an increase in exports and corporate profits from a global demand recovery, Friday’s Reuters poll showed.


    Data coming next week is forecasted to demonstrate that Tokyo-area consumer price index (CPI) fell again in June as slow consumer demand amid the COVID-19 pandemic caused a further easing of prices.


    Bank of Japan's quarterly tankan business sentiment survey was expected to show the headline index for big manufacturers' sentiment rose to plus 15 from plus 5 in March. An increase would mark the fourth consecutive quarter of improvement.


    "Large manufacturers are expected to see corporate profits improve as the yen remains on a depreciating trend, and are supported by steadily increasing conditions in exports due to a recovery in overseas economies”, analysts at the Japan Research Institute commented.


    The poll also showed that the mood among big non-manufacturers is also likely to improve, turning positive for the first time since the first quarter of last year, although still falling short of manufacturers, expected to come in at plus 3 from minus 1 in March.


    After contracting in January-March, Japan's economy is expected to grow at a much slower pace than other major economies such as the US in Q2, due to anti-pandemic measures and a late vaccine rollout.


    For the coming 3 months, big manufacturers' optimism is expected to rise to plus 18; big non-manufacturers' outlook index was seen rising to plus 8. Big firms will likely raise their capital spending plans by 7.2% for the current fiscal year as the outlook improves.


    The BOJ will announce the tankan quarterly survey results at 8:50 a.m. on July 1. So far, the Bank of Japan has maintained its large stimulus, while also saying it will launch a new scheme to encourage financial institutions to boost lending and investment for fighting climate change.

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