Business confidence at big manufacturers in Japan likely worsened to an almost three-year low in the April-June quarter, as the U.S.-China trade war and weakening global demand hurt the export-reliant economy, a Reuters’ poll found Friday.
A deterioration in corporate sentiment will add to the Bank of Japan’s concerns about slowing economic growth, after its governor signaled readiness to ramp up stimulus as global risks cloud the outlook.
The Bank of Japan’s quarterly tankan business sentiment survey is expected to show the headline index for big manufacturers’ confidence slipped to plus nine in June from plus 12 three months earlier, the poll of 16 economists showed.
That level for the index would be the lowest since September 2016, when it was at plus six.
The sentiment index for big non-manufacturers inched down to plus 20 in June from the plus 21 recorded in a March survey, the poll found.
“Slowdown in the global economy, weak exports and factory output due to lower demand for semiconductor-related products dented manufacturers’ mood,” said Yasunari Tanaka, a researcher at Mitsubishi Research Institute.
“An escalation in the U.S.-China trade conflict hurts exports and the yen’s appreciation damaged the corporate earnings environment,” he added.
In the March survey, sentiment among big manufacturers soured at its fastest pace in more than six years. But the pace of deterioration likely slowed in the June survey, propped up by relatively solid domestic demand and the 10-day extended holiday to celebrate the enthronement of a new emperor, analysts said.
In the September quarter, big manufacturers’ business confidence is seen slipping to plus six and non-manufacturers’ sentiment is expected to ease to plus 19, the poll showed.
Big companies are forecast to increase their capital spending plans by 8.9% for this fiscal year, up from 1.2% projected in the March survey.
“Although uncertainty over the overseas situation has been rising, we expect demand for upgrading aging facilities, as well as streamlining and labor-saving investment, will stay solid,” said Koichi Ishida, economist at Japan Research institute.
The BOJ will publish its tankan survey on July 1.
Japan’s factory output likely rose 0.7% in May from the previous month after a 0.6% gain in April, another poll of 17 economists showed.
“Domestic demand, such as consumer spending and public investment, remain solid, but falls in exports weighed on factory output,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
The trade ministry will announce May factory output on June 28.
The ministry’s May retail sales, which will be issued June 27, was expected to show a 1.2% increase from a year earlier, underpinned by auto sales, after a revised 0.4% gain in April, the poll showed.
Tokyo’s core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, was seen rising 0.9% in June from a year earlier, slowing down from a 1.1% gain in May due to falling oil prices.
The government will publish Tokyo’s core CPI on June 28.