Japan’s business confidence index drops amid trade tensions

TOKYO: Business sentiment among large Japanese manufacturers fell in June for the second quarter in a row amid growing concerns about trade with the United States, a Bank of Japan quarterly survey showed on Monday.
The Tankan index fell from plus 24 in March to plus 21 in June, almost in line with the estimated level of plus 22 predicted by analysts surveyed by the Nikkei Business Daily.
Large manufacturers forecast that business conditions would change very little in the current quarter, as the index is expected to be flat at 20 in September, the survey showed.
Sentiment among medium-sized manufacturers rose to plus 20 in June from plus 19 in March while the index for small manufacturers edged down to plus 14 from plus 15, according to the survey.
The index for large non-manufacturers edged up to plus 24 from plus 23 in March, the survey showed.
Positive numbers on the Tankan index indicate the extent to which optimists outnumber pessimists in a sector of industry.
Large corporations in the manufacturing and non-manufacturing sectors expected their investment to jump 13.6 per cent for the current financial year through March from the previous year.
The reading be at a median forecast of a 9.3 per cent increase surveyed by Nikkei.
Prime Minister Shinzo Abe’s government views strong corporate investment as key to Japan’s economic recovery.
Japan’s exports have slowed amid a rising yen this year. The appreciation of the currency makes Japanese goods less competitive overseas and hurts repatriated revenues.
The survey showed that large manufacturers expect the Japanese yen to rise to 107.26 yen per dollar this financial year from 110.79 yen in the previous year.
The Bank of Japan surveyed 9,950 companies from May 29 to June 29 for the latest survey.
Monday’s survey comes amid growing tensions over trade with the United States, Japan’s major ally.
The US Commerce Department has been conducting an investigation into whether imports of vehicles and car parts would pose a risk to national security.
The move came after President Donald Trump imposed high tariffs on steel and aluminium imports.
The Japanese government warned on Friday that potential US tariffs on vehicles and car parts would have a “devastating” impact on the global economy.
The tariffs, if imposed, could “seriously affect more than 1.5 million jobs created by Japanese auto-related companies in the United States and by inflicting costs on the consumers, lead to devastating effects on the US and global economy,” Tokyo said. — dpa