Corporate sentiment in Japan worsened for the second consecutive quarter, the Bank of Japan's Tankan quarterly survey for June showed Monday. Companies appear increasingly burdened by high crude oil prices and labor shortages, and have mounting concerns over the trade friction stemming from U.S. President Donald Trump's protectionist policies.
The headline diffusion index for large manufacturers deteriorated to plus 21, down three points from the previous March survey. It was the first time in 5-1/2 years, since December 2012, that the DI has dropped for two consecutive quarters.
The Tankan survey is conducted quarterly by the BOJ on about 10,000 companies across the country. The DI represents the percentage of firms that feel business conditions are good minus the percentage of those with the opposite view.
By industry, the DI for automakers stood at plus 15, seven points down from the previous survey.
Corporate managers appear to feel increasingly pressured by the protectionist policies of the United States -- their main market -- as well as by rising costs due to higher raw material prices and personnel expenses.
In March, Washington invoked import restrictions by imposing additional tariffs on steel and aluminum.
The DI for the steel industry slipped one point to plus 9, while that for the nonferrous metal industry was plus 26, six points down from the previous survey.
The index for the electrical machinery sector deteriorated four points to plus 20, against the backdrop of sluggish exports of electronic parts due to slowing demand for smartphones.
The DI for large nonmanufacturers improved one point to plus 24. Among these companies, the accommodations, food and beverage services sector was solid with an eight-point increase thanks to growth in the number of foreign tourists to Japan, although labor shortages still persist.
The DI for all industries of all sizes stood at plus 16, one point down, the first decline in eight quarters.
The latest survey was conducted from May 29 to June 29 with a 99.6 percent response rate.
U.S. protectionism a concern
By Ryuichi Washio / Yomiuri Shimbun Staff Writer
In addition to labor shortages and a sharp rise in raw material prices, the protectionist policies of the administration of U.S. President Donald Trump are suppressing business sentiment among corporate managers.
Current economic conditions are apparently solid, but anxiety over the future is spreading mainly among industries reliant on exports.
The employment conditions DI for all industries and all sizes of companies stood at minus 32, leading the BOJ to recognize that labor shortages are at a "historic level." Procurement prices have also been rising amid such factors as high crude oil prices.
The employment conditions DI represents the percentage of companies that say there are "excessive" employees available minus the percentage of companies that say labor is "insufficient."
Companies are increasingly on alert over worsening trade friction stemming from Washington. "[We are] cautious about a possible decline in trade volume and people's reluctance to buy [cars]," an official of a major automaker said. "In particular, the trade friction between the United States and China is a big risk."
If concerns over protectionism continue to smolder, it could dampen companies' investment drive and adversely affect the economy.
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