Japan Business Confidence

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Japan: Business sentiment deteriorates in Q4; prospects remain cloudy

December 15, 2014

According to the Bank of Japan’s quarterly TANKAN business survey, sentiment among large manufacturers deteriorated in Q4, inching down from Q3’s 13 to 12. The print came in below the reading of 13 that markets had expected. Despite the deterioration tallied in Q4, the index remains firmly entrenched above the 0-threshold, which means that optimists outnumber pessimists. Manufacturers are becoming less optimistic about the state of the economy, despite the sharp depreciation of the yen and falling oil prices. Q4’s result highlights the challenges Prime Minister Shinzo Abe is facing after his landslide victory in the 14 December general election.

Conversely, confidence in non-manufacturing industries improved in Q4, increasing from 13 in Q3 to 14.

Large enterprises in the manufacturing sector expect that conditions will deteriorate further in the next three months. The forward-looking forecast index fell to 9 in Q4 (Q3: +13), which marked the lowest print since Q1 2014. Meanwhile, large manufacturers forecast that the Japanese yen will average 104.0 JPY per USD in the second half of the fiscal year 2014 (ending March 2015).


Author: Ricard Torné, Lead Economist

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Japan Business Confidence Q4 2014

Note: Quarterly index of business sentiment. Values above 0 for manufacturers (actual result) indicate a positive assessment of the current business conditions. Values above 0 for manufacturers (forecast) indicate a positive assessment for the next quarter’s business prospects.
Source: Bank of Japan (BoJ).


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