By Kaori Kaneko
TOKYO- Japanese manufacturers turned slightly less confident about business conditions in August and the service sector’s mood eased, the monthly Reuters Tankan survey found on Wednesday, as lacklustre demand from China weighed on corporate sentiment.
The poll comes after the Bank of Japan (BOJ) last month raised interest rates to levels unseen in 15 years and released a detailed plan to slow its massive bond buying.
The sentiment index for manufacturers slipped to plus 10 in August, down one point from July, according to the Reuters Tankan survey, which closely tracks the BOJ’s quarterly business survey.
Manufacturers expect the index to decline further to plus five over the next three months, the survey showed.
“Auto sales are sluggish, especially in China,” a manager at an auto and transport machinery firm wrote in the survey.
Managers from a wide range of industries such as chemicals, steel and electronics machinery said that subdued demand in China affected their business sentiment.
Higher inflation and volatile markets were also among worrying issues, the survey found.
“Uncertain factors such as the cost of raw material and foreign exchange rates are increasing,” a manager at a rubber company wrote.
The Reuters poll was conducted from July 31 to Aug. 9, during which Japanese stocks plunged in their biggest single-day rout since 1987’s Black Monday selloff, after weak US labor data raised recession fears, and the yen surged against the dollar as investors unwound the carry trade.
The Reuters Tankan service-sector index eased for a second month to plus 24 in August from plus 26 in July. Non-manufacturers expect the index will rebound to plus 26 in November. Solid inbound demand underpinned the sector’s confidence.
The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.
A total of 506 large non-financial firms were surveyed and 243 firms responded on condition of anonymity for the August poll.
Japan’s economy likely rebounded in the April-June period after shrinking in the previous quarter thanks to a pick-up in factory output and consumption, a Reuters poll showed, helping the central bank make the case for further interest rate hikes.
But the yen’s recent rally and signs of slowdown in the U.S. economy may emerge as fresh risks to the export-reliant economy, some analysts say.
Japan’s real gross domestic product (GDP) is expected to have expanded an annualised 2.1 percent in April-June, according to a median forecast of economists polled by Reuters, rebounding from a 2.9 percent contraction in the previous quarter.
Private consumption likely rose 0.5 percent, marking the first increase in five quarters, as bumper pay hikes offered by companies in spring wage negotiations begin to boost household income, the poll showed.
Capital expenditure is expected to have increased 0.9 percent after a 0.4 percent drop in January-March, the poll showed, underscoring the Bank of Japan’s view that robust corporate spending will underpin growth.
