Japan survey shows corporate sentiment is worsening

Japan flag (Photo: inu-photo/ Flickr)

TOKYO —  A quarterly business outlook survey by Japan’s central bank shows corporate sentiment has worsened for the first time in two years.

The Bank of Japan’s “tankan” index for large manufacturers, released Monday, was 24 in March, down two points from December.

The forecast continued to be pessimistic with the index expected to fall to 20 over the next quarter.

The survey is seen as a major economic indicator.

The index is the difference between companies surveyed that have a “favourable” outlook and those with an “unfavourable” outlook.

So the reading still shows optimists outnumber pessimists but that difference is starting to shrink.

A looming U.S.-China trade war after President Donald Trump’s tariffs and China’s action in response could further hurt the Japanese economy.

The results also show the momentum of growth under “Abenomics” could be running out of steam.

Prime Minister Shinzo Abe has been trying to wrest the economy out of decades of doldrums by fighting deflation, a continuing spiraling down of prices that deadens the economy —  an effort that has met with some success.

But the Japanese economy is heavily dependent on exports and hurt by a shrinking of its labour force.

“Softer than expected tankan for large manufacturers marked by first slippage, albeit modest, in eight quarters being attributed to a stronger Japanese yen,” says Vishnu Varathan, of the Asia and Oceania Treasury Department of Mizuho Bank.

A strong yen erodes the value of Japan’s exports when converted into yen.