Japan business mood sours as Ukraine war, rising fuel price take toll

Reuters file photo
The Bank of Japan (BOJ) building is reflected on the signboard of a bank in Tokyo on November 24, 2009.

TOKYO (Reuters) – Japanese business confidence soured in the first quarter, a quarterly central bank survey showed on Friday, as companies took a hit from supply disruptions and surging raw material costs caused by the Ukraine crisis.

Big companies expect conditions to worsen further three months ahead, the Bank of Japan’s closely-watched “tankan” survey showed, clouding the outlook for the fragile economic recovery.

The outcome will be among factors BOJ policymakers will scrutinize in producing fresh quarterly growth and inflation projections at their next meeting on April 27-28.

The headline index for big manufacturers’ sentiment slipped to plus 14 in March from plus 17 in December, the tankan showed, compared with a median market forecast for plus 12.

The big non-manufacturers’ sentiment index also worsened to plus 9 from plus 10 three months ago, compared with market forecasts for a reading of plus 5.

The tankan also showed big firms will likely raise their capital spending plans by 2.2% for the current fiscal year that began in April, compared with market forecasts for a 4.0% gain.

Soaring fuel and food prices blamed on the Ukraine war, coupled with rising import bills from a weak yen, have added to pain for households and Japan’s economy still reeling from the coronavirus pandemic’s hit.

Analysts expect Japan’s core consumer inflation to approach the central bank’s 2% target as early as in April, though the BOJ has said it will not respond to cost-push inflation with policy tightening.