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The
quarterly survey, called the “tankan,” showed the outlook among
major manufacturers, the key so-called diffusion index, rose 1
point to plus 14 from the findings in June.
The survey is an indicator of companies foreseeing good
conditions minus those feeling pessimistic.
The tankan for large manufacturers was plus 12 in March, marking
the first drop in a year. Sentiment among large
non-manufacturers was unchanged at plus 34, according to the
latest tankan.
The relative optimism in the latest tankan reflects some relief
over an agreement on tariffs with the U.S., reached in July.
The deal with the administration of President Donald Trump
imposes a 15% tariff on most goods exported to the U.S. Some
goods face higher tariffs.
Initially, the U.S. imposed a 25% tariff on auto imports, so the
latest deal is an improvement for Japanese automakers. It also
increases certainty over U.S. policy, at least for now.
However the higher tariffs imposed on exports to the world's
biggest market are still squeezing profits, wages, investment
and spending for many industries..
Kei Fujimoto, senior economist at SuMi Trust, said that despite
the concerns about the tariffs’ impact on Japanese corporate
earnings, the damage so far has been relatively limited.
Inbound tourism is also helping.
“We do not believe inbound-related demand from tourists has
peaked. The number of tourists visiting Japan continues to show
an upward trend,” he said.
The tankan findings could influence an upcoming decision by the
Bank of Japan on interest rates. The BOJ has kept rates near
zero for years to help stimulate consumer spending and business
investment and counter weak demand that led to deflation.
But prices have risen above the central bank's target range of
about 2%. The tankan shows the average inflation outlook for one
year ahead was unchanged at 2.4%.
Analysts expect the Bank of Japan to raise its benchmark rate
soon, but it’s unclear if it will do so at the next meeting
later this month, or later. The central bank raised its
benchmark rate to 0.5% from 0.1% earlier this year.
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