- Index of major manufacturers +6 in May, first positive value in 2023
- Services sentiment at 5-month high, outlook little changed
- Manufacturers’ mood is likely to have improved despite the uncertainty
- Reuters Tankan is closely correlated with BOJ Tankan
TOKYO, May 24 (Reuters) – Business sentiment at major Japanese manufacturers turned positive for the first time this year and sentiment in the services sector hit a five-month high, Reuters’ Tankan survey showed, as the economy recovered from a COVID-19 -Crisis further improved. led to the recession.
Wednesday’s monthly survey, which tracks the Bank of Japan’s closely-watched quarterly Tankan survey, showed manufacturers remain upbeat about the coming three months, while sentiment in the service sector has eased somewhat.
The solid reading could further fuel speculation that the Bank of Japan will start normalizing its easing policy sooner rather than later. However, Governor Kazuo Ueda has repeatedly stated that inflation, supported by wage increases, needs to stabilize at a sustainable level of 2% before the bank can consider an exit.
“Given Governor Ueda’s cautious stance on the global economy, there is still some time before the BOJ begins normalizing monetary policy,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
“Sentiment among major manufacturers has lifted on improvements in the auto industry and is likely to remain in positive territory, although the pace of recovery will be moderate.”
The sentiment index for major manufacturers hit an increase of +6 from April, according to the survey of 493 companies, 241 of which responded from May 10-19.
It was the first positive reading this year and is likely to rise further in August.
Automakers and oil refiners were among the manufacturers reporting positive reactions as supply chain bottlenecks eased.
“As daily life returns to normal after the pandemic, shoppers’ desire to buy has increased, causing department store sales in urban areas to post double-digit growth,” wrote a retailer executive.
However, many others complained about the cost of doing business, which was attributed to still high global inflation in goods and services.
“The weak yen and rising crude oil prices have pushed up the cost of everything from commodities to services, which has hurt consumption,” wrote an executive at a food processing company.
The service sector index rose slightly from April to April 25, reaching its highest level this year, led by retailers and real estate and construction companies.
The world’s third-biggest economy recovered from recession in January-March as the recovery in consumption from the COVID-19 crisis offset global headwinds and raised hopes of domestic demand-led growth.
Last month, the BOJ’s Tankan showed that manufacturing sentiment deteriorated in January and March to its worst level in more than two years.
The sentiment poll indices are calculated by subtracting the percentage of pessimistic respondents from optimistic respondents. A positive number means there are more optimists than pessimists.
Reporting by Tetsushi Kajimoto, edited by Shri Navaratnam
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