Japanese business sentiment improved in the second quarter of 2023 as raw material costs peaked and the removal of pandemic curbs lifted factory output and consumption, a central bank survey showed, a sign the economy was on course for a steady recovery.
Companies expect to increase capital expenditure and project inflation to stay above the Bank of Japans 2% target five years ahead, the quarterly "Tankan" showed, offering policymakers hope that conditions for phasing out their massive monetary stimulus may be gradually falling into place.
The headline index measuring big manufacturers mood stood at plus 5 in June, bouncing back from a two-year low of plus 1 hit in March in a sign firms were recovering from the hit from rising raw material costs and supply disruptions. The reading, which compared with a median market forecast for plus 3, was the highest since December 2022.
The sentiment index for big non-manufacturers improved to plus 23 in June from plus 22 three months ago, increasing for the fifth straight quarter and hitting the highest level since June 2019, the survey showed on Monday, according to Japan's Kyodo News Agency.
"Manufacturers do not appear to be worried too much about the risks of a slowdown in overseas economies as far as the survey goes," said Shotaro Kugo, senior economist at Daiwa Institute of Research.
Automakers were more optimistic than three months earlier due to a pickup in production that had been hurt by parts shortages.
Sentiment also improved among companies manufacturing textiles, petroleum and coal products, steel and food as a surge in raw material prices paused and more firms were able to raise prices to pass on higher costs, according to the quarterly survey.
Source: Qatar News Agency