September 16, 2023
Confidence among major Japanese manufacturers and the services sector has dropped, according to a September Reuters poll, primarily due to concerns about China’s slowing economy impacting global and domestic growth. This pessimism poses challenges for Japanese policymakers, casting doubt on whether exports can drive economic recovery given weak domestic demand.
The Reuters Tankan monthly poll surveyed 502 large manufacturers, with the sector’s sentiment index falling sharply to plus 4, compared to plus 12 in August, marking the largest decline since January when the index dropped 14 points. This survey, conducted from August 30 to September 8, serves as a leading indicator for the Bank of Japan’s crucial quarterly tankan survey, scheduled for October 2, and offers insights into business conditions for upcoming BOJ policy-setting meetings.
Many Japanese firms expressed concerns about rising raw material costs and sluggish demand at home and abroad. Geopolitical uncertainties related to the Ukraine conflict and escalating U.S.-China tensions were also cited as challenges. Overseas markets, notably China, were noted for their decline, and domestic demand remained lackluster.
Compared to three months prior, the manufacturers’ sentiment index declined by four points, hinting at a potential dip in the quarterly tankan survey. The Reuters Tankan non-manufacturers index also fell by nine points to plus 23 in September, representing the largest drop since May 2020. Over the quarter, the service-sector index dipped by one point from June, indicating a minor decline in the BOJ’s quarterly tankan survey.
Source: Reuters
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