Japanese business optimism lowest since October 2016
Staff Writer |
The IHS Markit Business Outlook survey for February shows weakening confidence among Japanese private sector companies. Nonetheless, firms are more optimistic towards profits amid forecasts of higher new business.
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Although firms predict sharper cost inflation, companies anticipate that this will be partially offset by increases in average selling prices.
October’s Business Outlook survey signals weaker business confidence among Japanese private sector companies, with the net balance of firms forecasting output to increase over the coming year down from +21% in October to +16% in February.
This indicates the weakest level of positive sentiment since October 2016.
Moreover, business optimism in Japan is at the bottom of the global rankings.
As has been the case since February 2013, manufacturers are more optimistic than their service sector counterparts.
However, a broad-based weakening of business confidence contributed to the decline at the composite level.
Japanese enterprises expect that the 2020 Tokyo Olympic Games, as well as new client wins and product launches, will boost business activity over the coming 12 months.
That said, businesses express concerns over rising raw material costs and geopolitical tensions.
Goods producers and service providers project new business inflows to rise.
However, survey data points to weaker sentiment in the former, but stronger optimism in the latter.
Overall, composite level data shows private sector firms are more confident towards new business than in last October.
Panellists anticipate improved demand from both domestic and overseas markets.
Moreover, firms expect to gain from an upturn in demand ahead of the consumption tax hike due in 2019.
Japanese private sector firms expect to raise their workforce numbers over the next year, albeit at a slightly weaker pace than in the previous survey period.
Sector data indicate that the expected rate of job creation is firmer among manufacturers than service providers.
Firms note that new staff hiring is expected in order to replace retirements.
Private sector businesses also look set to increase investment spending over the coming 12 months.
Sentiment towards capital expenditure was broadly equal across both manufacturing and service sectors.
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