Japan: Business sentiment remains positive but dips in Q2
Business sentiment among large manufacturers—according to the Bank of Japan’s closely watched Tankan survey—came in at plus 9 in Q2, down from plus 14 in Q1. In contrast, confidence among large non-manufacturing firms rose to 13 in Q2 from 9 in Q1. As such, the sentiment values remained above the zero-threshold separating pessimism from optimism regarding current business conditions.
Analysts at Nomura commented on the print:
“The survey results highlight the Japanese economy’s vulnerability to rising prices. […] Japan’s economy thus has now entered a crucial phase in which the government will need to implement measures that strengthen the economy’s resistance to inflation. However, rather than ad-hoc measures to control rising prices, the government should focus on creating an environment supportive of future wage growth. It is becoming increasingly important that the BOJ be more concerned about the yen’s continued depreciation and work with the government to curtail rising prices and avoid a further strengthening of individuals’ and companies’ expectations of rising inflation over the medium to long term.”