An increasing number of corporations are apprehensive about the future of the economy. They should make their structure less subject to changes in the business environment, as their business performance is positive now.
The Bank of Japan's Tankan quarterly survey of the short-term economic outlook for March has shown that the diffusion index (DI) of business sentiment among major manufacturing corporations stands at plus 24, down two points from the preceding quarter and marking the first change for the worse in eight quarters. The DI index for major nonmanufacturing companies saw the first decline in six quarters.
The international prices of crude oil, metal and other raw materials have increased, resulting in a rise in purchasing costs. The worsening labor shortage is an expanding hindrance to business operations.
It is safe to say that cost increases, which have arisen from progress in the economic recovery both at home and abroad, are surfacing as a major problem to be tackled.
The indexes for expected business confidence three months ahead among both large and smaller corporations point to a turn for the worse compared to the current figures.
The growing sense of a labor shortage is particularly difficult to deal with.
The percentage of corporations feeling they are shorthanded has continued to increase, according to the Tankan surveys, which are released quarterly. The figure has reached a level comparable to those recorded during the bubble economy.
There has been a succession of cases in which retail shops and restaurants have had to shorten their business hours, as well as construction companies giving up on accepting orders for construction work. The circumstances of the moving industry have brought about social disruption, as moving companies are receiving more orders than they can handle during this spring's peak period.
Govt must provide boost
Using robots and other utilities for labor-saving purposes will be one of the keys to coping with the situation.
Raising wages is important for securing necessary workers. If many companies pay larger salaries, it can be expected to encourage consumption.
The amount of capital investment by large corporations in fiscal 2017 is believed to have exceeded the previous year's level. This trend should be accelerated.
If corporations return to a defensive stance, the growth of the Japanese economy will not continue. Wisdom should be exercised in making investments in a positive manner conducive to generating new demand.
Increasing instability in the financial market is another cause of worry. The appreciation of the yen and falling stock prices could aggravate the business performance of export and other industries.
It will be essential to once again consider matters related to boosting corporations' ability to withstand a strong yen, such as further improving their business efficiency and shoring up their domestic sales.
The government should expedite its growth strategy, including the development of new technology and work style reform efforts, thereby supporting private-sector activities.
There is growing wariness about protectionist policies adopted by the U.S. administration of President Donald Trump.
Prime Minister Shinzo Abe will visit the United States from April 17. During talks with Trump, the prime minister must persistently explain the harmful effects of strong import restriction measures.
Bank of Japan Gov. Haruhiko Kuroda will start a new term on Monday. This comes after the central bank's two deputy governors were replaced with new appointees last month.
Although it is too early for the bank to reconsider its "different-dimension" monetary relaxation, it will be important to take the helm in a flexible manner that is sensitive to business sentiment, so the monetary situation will be put back on the right track.
(From The Yomiuri Shimbun, April 3, 2018)
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