Although recent business sentiment among companies has stopped falling, businesses seem to be unable to dispel their concerns about the future.
The Bank of Japan released its Tankan short-term economic survey for December.
The diffusion index for large manufacturers' current business conditions stood at plus 19, unchanged from the previous survey for September this year, while that for large nonmanufacturers' current business conditions rose by two points to plus 24. The index for small and medium-sized manufacturers also remained on the same level as in the previous survey, while that for small and medium-sized nonmanufacturers slightly improved.
The latest data has supplied evidence that business conditions have been at a standstill.
Worrisome is that the business outlook diffusion index, which forecasts business conditions three months in the future, has shown a steep deterioration for both large enterprises and small and medium-sized companies.
Among large manufacturers, those in the category of production machinery and others expect a marked drop in the outlook index, in addition to a fall in the index for current business conditions. A similar trend is seen among automakers. The business sentiment among large manufacturers is weak, especially among export-oriented companies.
They are probably worried about such developments as a slowdown in economic conditions overseas, including in China, due to such factors as worsening trade friction between the United States and China.
For large nonmanufacturers, the impact of such natural disasters as a major earthquake and torrential rains seems to have eased. The indexes for retailing, accommodations, and eating and drinking services have slightly improved.
Nevertheless, consumer spending continues to be sluggish. The business outlook diffusion index for such businesses as services for individuals, for instance, has dropped by a large margin, which calls for vigilance.
Recent business performances have been, on the whole, steady. There is no need to be overly pessimistic, but it is a matter of concern that a lull in the economic recovery has continued over a protracted period.
Address labor shortage
With stock prices continuing to be unstable globally, the sense of uncertainty over the future prospects of economic conditions overseas runs strong. The government and the Bank of Japan have to exercise vigilance so that the Japanese economy does not take a downward turn.
In the Tankan survey, large enterprises' fixed investment for this fiscal year has stayed at a high level, up 14.3 percent year-to-year. Business enterprises' positive attitude about their fixed investment is an encouraging factor.
Businesses should make efforts in research and development and the introduction of advanced technologies. These endeavors would lead to further development of the Japanese economy.
The index showing the sense of labor shortages among companies continues to be on par with levels seen during the bubble economy. How to bring in foreign workers, in addition to increasing employment opportunities for women and elderly people, will become a big challenge.
In the recently adjourned extraordinary Diet session, the revised Immigration Control and Refugee Recognition Law was passed into law, with the quota of the number of foreign workers accepted into the country to be increased, starting next April. This could be good news for food-service and construction industries, which are notably suffering from labor shortages.
The government should expedite its efforts to put the finishing touches on the details of the relevant system so that the acceptance of foreign workers can proceed smoothly.
It is businesses that play a leading role in the domestic demand-led growth of the economy. Continued pay increases would lift consumption, leading to further improvement in business performance. Businesses that enjoy brisk performance should contribute to the realization of a "virtuous circle economy."
(From The Yomiuri Shimbun, Dec. 17, 2018)
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