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TOKYO (Jiji Press) — The Bank of Japan’s Tankan quarterly survey for March, to be released Friday, is forecast to show a deterioration in business sentiment among both large manufacturers and nonmanufacturers.
According to the average estimate by 16 private-sector think tanks, the headline diffusion index (DI) for large manufacturers’ current business conditions will stand at plus 11, down 6 points from the previous survey for December last year.
Many think tanks see negative effects of higher resources prices exacerbated by Russia’s invasion of Ukraine and the spread of the omicron coronavirus variant.
The DI represents the percentage of companies seeing good business conditions minus that of those feeling the opposite.
In the March Tankan report, companies covered by the survey are reviewed. The results of the December survey were recalculated under the new standards.
Regarding the expected deterioration in large manufacturers’ index, Dai-ichi Life Research Institute Inc. said, “The invasion of Ukraine has caused higher crude oil prices, dampening corporate sentiment.”
Other negative factors include cost increases caused by the yen’s weakness and vehicle production cuts due to semiconductor shortages.
The average estimate by the think tanks put the DI for large nonmanufacturers at plus 5, down 5 points.
The index is seen dropping for the first time in seven quarters on deteriorating sentiment mainly among providers of in-person services, such as hotels and restaurants, due to the spread of coronavirus variants.
The business outlook DI is forecast at plus 11 for large manufacturers and plus 8 for large nonmanufacturers.
“The situation in Ukraine is unlikely to calm down anytime soon,” Mizuho Research and Technologies Ltd. said. “Commodity prices remain high, weighing on the overall manufacturing sector.”
Think tanks expect companies to become more cautious about capital spending in fiscal 2022 because of uncertainties over the course of the economy amid accelerating global inflation and monetary policy tightening in the United States and Europe.
