Kantaro Komiya
TOKYO (Reuters) – Japanese manufacturers’ business confidence retreated from a seven-month high in September, while that of services firms fell to a five-month low point, as the Reuters Tankan survey shows that the corporate sector is under significant cost pressure.
While Japan’s annual consumer inflation rate remains well below global peers at around 2.5%, wholesale inflation has been hovering near double-digit levels, squeezing customers facing inflation vigilance and the profit margins of consumer companies.
The yen recently fell to 24 year lows, exacerbating the pain of rising import costs for domestic firms, although weaker units benefit some exporters, The companies surveyed in the world’s third-largest economy said.
“We are seeing strong demand, but raw material and fuel costs are rising faster than we are raising prices,” said a manager of a glass maker in August 31-September 9 polls tracking the Bank of Japan’s (BOJ) quarterly survey following the “Tankan” survey.
Reuters Tankan Manufacturers Confidence Index fell to 20 from last month’s 13 until September. The services index slipped to 10 from 19 last month, the lowest level since April.
Manufacturers say the situation is likely to remain unchanged for the next three months, while in the survey of 495 large and medium-sized companies, the outlook for service companies is slightly better, of which 252 response. The machinery, refining and ceramics sectors were hit the hardest in the September survey, with sub-indexes posting double-digit declines.
“Uncertainty caused by the situation in Russia and Ukraine and rising raw material prices have made our customers cautious about their capital expenditure plans,” said a machinery manufacturer manager. The textile and paper industry achieved double-digit growth.
“Demand is recovering since Japan, following Europe and North America, shifted its COVID-handling policy to one with no restrictions,” said a paper company manager, but added, “Chinese cities Concerns such as lockdowns and the risk of a power crunch are still lingering. “
The impact of a weaker yen, which has fallen about against the dollar this year. % and sparked a strong verbal warning from policymakers this month,
In the survey, companies that primarily target domestic customers, such as food manufacturers, construction companies and wholesalers , expressed concern about rising costs due to a weaker currency. Still, export-dependent companies, including machinery makers and shipping companies, took comfort in the weaker yen, which has boosted their market competitiveness and boosted sales.
Between the two, “a persistently weak yen is good for sales but bad for raw material costs, so it’s a back-and-forth situation,” said a machinery company interviewee.
Among non-manufacturers, some said high COVID- 19 cases in Japan hindered consumers from resuming in-person activities, although no Government – In addition to ongoing border controls, restrictions have been imposed.
“The situation is hardly different from when there are restrictions,” said a service company manager.
For the three-month forward outlook, manufacturers expect their ) overall sentiment will not change, while service companies say their sentiment will increase by 3 percentage points to 14, according to the poll.
The Bank of Japan is scheduled to release the results of its next quarterly Tankan survey on October 3.
