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Japan Business Confidence Q1 2021

Japan: Business sentiment improves in Q1, turns optimistic among large manufacturers

Business sentiment among large manufacturers—according to the Bank of Japan’s closely watched Tankan survey—came in at plus 5 in Q1, up markedly from the negative 10 reading clocked in Q4 2020 and above market expectations of a flat reading. 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. As such, the sentiment value rose above the 0-threshold separating pessimism from optimism regarding current business conditions, and in the process clocked the highest figure since Q3 2019.

Furthermore, confidence among large non-manufacturing firms rose to minus 1 in Q1 from minus 5 in Q4 2020.

Regarding the outlook, sentiment among large manufacturers regarding business conditions in Q2 was plus 4, down slightly from the current reading of plus 5 but nevertheless remaining in optimistic territory. Sentiment among large non-manufacturing firms was minus 1, matching the current reading and thus remaining marginally in pessimistic territory. As such, businesses remained somewhat cautious regarding operating conditions in the coming months, although fears surrounding the ongoing pandemic do seem to be gradually fading.

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