Business Confidence of Big Japanese Companies Improves

Business sentiment among big manufacturers in Japan picked up to touch pre-pandemic levels over Q1 2021, buoyed by companies’ plans to increase capital spending over rising hopes for global economic recovery. The Tankan survey, which is closely monitored by the BOJ, revealed a rise in the headline business sentiment index from -10 in December to +5 in March, rising above 0 indicating optimism among the companies surveyed.

The reading beat economists’ forecast, which was for a reading of 0 instead and revealed a significant improvement in business confidence. Meanwhile, the sentiment among leading non-manufacturing firms in the nation also registered an improvement from Q4 2020 to Q1 2021, climbing from -5 in December to -1 in March.

The data offers hope for speedy recovery in the world’s third largest economy, and is likely to take some pressure off policymakers struggling to offset the impact of the ongoing coronavirus crisis. Japan’s trade reliant economy was expected to post a strong rebound on the back of improvement in external demand, but with most of its key trade partners – especially Europe, still battling wave after wave of the pandemic, overseas demand could take longer than anticipated to pick up.

The survey also indicated that big companies in Japan are planning to increase capital spending by 3% during the current fiscal year beginning in April. This is better than the economists’ forecast for an increase of 1.4% during the period.