Business Sentiment Among Japan’s Manufacturers Worsens, Comes in Weaker Than Expected
Business sentiment among leading manufacturers in Japan declined close to a seven-year low in Q4 2019 over the ongoing US-China trade war and a slowdown in global economic growth. The BOJ Tankan survey’s manufacturing sentiment index touched 0 in December from +5 in September.
Economists had previously forecast a smaller decline to +2 instead. Meanwhile, business sentiment among non-manufacturers registered a smaller decline from +21 in September to +20 in December, revealing a smaller impact of the recent sales tax hike implemented in October. Economists were expecting this reading to fall to +17 instead.
The Tankan survey also reveals that big businesses were planning to hike their capex spending by 6.8% in the present fiscal year, higher than the planned spending in the previous quarter. Capital spending plans have also come in better than economists’ expectations, which were for a 6.0% hike.
The BOJ remains optimistic that capital spending and robust domestic demand could help support Japan’s economic growth even in the face of weakening exports and manufacturing. However, there are concerns that domestic demand could slow down further than previously forecast as a result of the sales tax hike from 8% to 10%.
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