Japan companies less confident about business conditions – Reuters Tankan

Employees of Suzette Holdings Co prepare cakes at a shop in Tokyo, Japan April 27, 2023. REUTERS/Kim Kyung-Hoon/File photo

TOKYO  – Confidence at big Japanese manufacturers fell in July for the first time in six months, the Reuters Tankan survey showed on Wednesday, in a sign of growing exporter concern about weakening overseas demand.

Their index fell to plus 3 in July, from plus 8 in the previous month. Industries like steel, oil refining and food processing saw particularly large slumps in sentiment.

Last month saw Asian factory activity drop, hurt by sluggish demand from China in particular.

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“The global economy is grappling with things like U.S.-China trade tension and the prolonged war in Ukraine, making for an uncertain outlook. At the same time, competition is intensifying both in domestic and overseas markets,” a machinery maker manager wrote in the comment section of the survey.

The Reuters poll of 504 large companies, of which 255 responded, also saw many firms cite chip shortages and the elevated costs of raw materials as negative factors.

The service-sector index fared much better, with the non-manufacturers index slipping just one point to +23, though it was a second straight month of decline.

Retailers and real estate firms logged big jumps in confidence but sentiment at information and communications companies – while still robust – dropped somewhat.

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“Business is good because sales remain solid with restaurants, many of whom are our main customers, thanks to a rise in inbound tourism,” wrote a manager at a wholesale firm.

The Reuters poll, conducted July 5-14, found corporate confidence was expected to rebound over the coming three months, with manufacturers’ sentiment seen at +7 and service sector sentiment seen at +25.

The Reuters Tankan indexes, which can serve as leading indicators for the Bank of Japan tankan surveys, are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists. Respondents reply on condition of anonymity.