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Japan Business Confidence Q3 2018

Japan: Business confidence weakens for third consecutive quarter in Q3

According to the Bank of Japan’s quarterly Tankan business survey, sentiment among large manufacturers fell in the third quarter of 2018 for the third straight period, suggesting that rising trade protectionism and an uncertain global economic outlook are negatively affecting business mood. The index dropped from 21 in Q2 to an over one-year low of 19 in Q3, coming in below market expectations of 22. Confidence in non-manufacturing firms fell from 24 in Q2 to 22 in Q3. The Tankan business survey is calculated by subtracting the number of respondents who say economic conditions are improving from those who say they are deteriorating. A positive reading means optimists outnumber pessimists.

The forward-looking indicator for the next three months declined from 21 to 19, indicating firms expect business conditions to deteriorate slightly.

The survey also showed that large firms expect capital spending to increase 13.4% in the financial year from April 2018, below market expectations of a 14.2% increase.

Lastly, large manufacturers forecast that the Japanese yen will average 107.3 JPY per USD in the second half of the 2018 fiscal year, which ends in March 2019 (Q2 forecast: 107.3 JPY per USD)

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