Japan's central bank survey finds less optimistic manufacturers, but happier service sector

The tankan, carried out every three months, surveys about 9,000 Japanese companies and measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those saying they are positive.The optimism among the non-manufacturing businesses reflects the return of tourism, both overseas and domestic, which had been hurt by the pandemic.

A key Japanese central bank report said Monday that sentiment among big manufacturers has sagged but that optimism is at a three-decade high among large business outside the manufacturing sector.

The Bank of Japan's "tankan" report said sentiment among large manufacturers, which include auto and electronics giants, declined in March for the first time in a year, standing at plus 11, down two points from December. The average market forecast by Japanese news service Kyodo was 9.

The index for large-scale non-manufacturers, including the service sector, hit a 33-year high at plus 34 points, up two points from the last report in December. The tankan, carried out every three months, surveys about 9,000 Japanese companies and measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those saying they are positive.

The optimism among the non-manufacturing businesses reflects the return of tourism, both overseas and domestic, which had been hurt by the pandemic. Incoming travelers have recently outpaced pre-pandemic levels.

The downturn in the views among manufacturers reflects production stoppages at Daihatsu Motor Co., a Toyota Motor Corp. subsidiary that specializes in small vehicles. Daihatsu has acknowledged it didn't carry out proper safety tests. The Japanese economy has tended to stagnate in recent years, with slow wage increases as well as deflation, or the continuous sliding down of prices, rather than the inflation affecting some parts of the world.

Another negative has been soaring energy prices. Japan imports almost all its oil.

The weakening currency has also hurt some sectors. The U.S. dollar is recently trading at about 150 yen, up dramatically from about 130 yen a year ago. A weak yen works as a plus for encouraging tourism. It also helps exporters, like Toyota and Nintendo, by boosting the value of their overseas earnings when converted into yen.

The Bank of Japan raised its benchmark interest rate last month for the first time in 17 years, ending a longstanding policy of negative rates meant to boost the economy.

The bank has an inflation target of 2% that it uses as a benchmark for whether Japan has finally escaped deflationary tendencies. It said monetary policy will remain easy for some time, while noting that wages and profits at companies were improving.

The tankan report's forecast for future sentiment among large manufacturers stood at 10, while the index for large non-manufacturers was 27, both lower than the levels reported Monday.

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