Japan Business Confidence Q1 2016


Japan: Q1 Tankan calls into question Abenomics

April 1, 2016

According to the Bank of Japan’s quarterly TANKAN business survey, sentiment among large manufacturers deteriorated sharply in Q1 and hit a nearly-three-year low. The index fell from Q4’s 12 to 6 and came in below the reading of 8 that markets had expected. That said, manufacturers’ sentiment remains above the 0-threshold, which means that optimists outnumber pessimists. Business conditions were hit by a strong yen and tepid global demand and cast doubts about the ability of Abenomics to rekindle economic growth.

Confidence in non-manufacturing industries declined in Q1, falling from 18 in Q4 to 13 and marking a six-month low.

Rising global uncertainty and faltering demand are prompting large enterprises in the manufacturing sector to become more pessimistic about the country’s economic outlook in the next three months. The forward-looking forecast index fell from Q1’s 7 to 3 in Q2, which represented the lowest level since Q1 2013. Meanwhile, large manufacturers forecast that the Japanese yen will average 117.5 JPY per USD in the second half of the fiscal year 2016 (ending March 2017).

Author: Ricard Torné, Lead Economist

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Japan Business Confidence Chart

Japan Business Confidence Q1 2016

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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