Japan: Business confidence improves in Q4, remains deeply pessimistic
December 14, 2020
Business sentiment among large manufacturers—according to the Bank of Japan’s closely watched Tankan survey—came in at negative 10 in Q4, up markedly from the negative 27 reading clocked in Q3 and above market expectations of minus 15. The value is calculated by subtracting the number of respondents that say economic conditions are improving from the number of respondents that say they are deteriorating. While, the sentiment value remained below the 0-threshold separating pessimism from optimism regarding current business conditions, the unexpectedly strong improvement hints at firming hopes of a strong recovery in 2021 from the pandemic-induced downturn this year.
Furthermore, confidence among large non-manufacturing firms rose to minus 5 in Q4 from minus 12 in Q3.
Regarding the outlook, sentiment among large manufacturers regarding business conditions in Q1 2021 was minus 8, up slightly from the current reading of minus 10 but still remaining in pessimistic territory. Sentiment among large non-manufacturing firms was minus 6, down marginally from the current reading of minus 5 and thus remaining in pessimistic territory. As such, businesses expect operating conditions to remain challenging in the coming months, albeit slightly less so.
Author: Stephen Vogado, Economist