TOKYO, April 3 (Reuters) – Japan’s business sentiment fell in January-March to hit its worst level in more than two years, a closely watched central bank survey showed on Monday, while the slowdown in global growth sets the outlook for the export-dependent. economy.
The situation in the services sector, in contrast, has recovered as the easing of border controls and the end of the COVID-19 curbs raised hopes for a rebound in tourism and consumption, the Bank of Japan’s tankan survey showed. .
The survey is one of the key data that the central bank will examine when making new quarterly growth and inflation estimates at its next meeting on April 27-28 – the first chaired by incoming Governor Kazuo Ueda.
The headline index measuring sentiment among major manufacturers fell to plus 1 in March from plus 7 in December, Bank of Japan (BOJ) data showed, worse than a median market forecast for a reading of plus 3. This is the fifth consecutive quarter of deterioration. and the worst level hit since December 2020.
Sentiment worsened for a broad sector of manufacturers with many companies complaining about the impact of rising raw material and fuel costs, as well as slowing growth overseas and a decline in chip demand, a BOJ official said in a briefing.
The major non-manufacturers’ index rose for the fourth quarter to plus 20 from plus 19 in December, matching a median market forecast, the survey showed, as hopes of a rebound tourism and service demand boosted the morale of retailers and hotels.
Takeshi Minami, chief economist at Norinchukin Research Institute, expects external factors, such as fallout from the US and European monetary tightening, to weigh on Japanese exports and business sentiment.
“Given the weak nature of Japan’s recovery, the BOJ is not in a situation where it can normalize monetary policy anytime soon,” he said.
Major companies plan to increase capital spending by 3.2% in the fiscal year that began in April, below market forecasts for a 4.9% gain, the tank showed.
Companies expect inflation to hit 2.8% a year from now, 2.3% three years from now and 2.1% five years from now, the survey showed in a sign that companies are preparing for inflation. will remain above the central bank’s 2% target in the coming years. .
Japan’s economy narrowly avoided a recession in the last three months of 2022 and analysts expect any rebound in the January-March quarter to be modest, as slow wage growth and rising living expenses hurt consumption.
Many major companies have promised big pay increases in spring wage talks with unions, offering lawmakers hope that consumption will pick up and take the slack from an expected decline in exports.
The strength of the economy, as well as the wage and inflation outlook, will be key to how quickly the BOJ can tweak or end bond yield control policy that has been criticized as distorting market prices and hurt the margins of financial institutions.
Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Sam Holmes
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