Weaker manufacturing expected in June BOJ survey

Jiji Press

12:54 JST, June 29, 2022

TOKYO (Jiji Press) — The Bank of Japan’s “Tankan” survey for June is expected to show deterioration in manufacturing sentiment for the second straight quarter, reflecting rising materials costs, according to the latest projections of 16 think tanks.

In contrast, the June survey, due out on Friday, is predicted to show improvement in nonmanufacturing sentiment, as the services sector is seeing earnings recovery thanks to a fall in new COVID-19 infections. Think tanks forecast on average that the headline diffusion index for business sentiment among large manufacturers will fall 1 point from the March survey to 13.

Daiwa Institute of Research Ltd. cited the worsening external environment surrounding manufacturers, such as higher commodity prices amid Russia’s invasion of Ukraine, as well as parts shortages against a backdrop of the COVID-19 lockdown in Shanghai.

Meanwhile, the DI for large non-manufacturers is projected to rise 6 points to 15, following the full lifting of the government’s coronavirus pre-emergency measures in March, which is believed to have buoyed sentiment in the hospitality industry, including restaurants and hotels.

Close attention is being paid to price-related data in the June survey, as the rapid weakening of the yen has been driving import prices higher.

BNP Paribas Securities (Japan) Ltd. said the quarterly survey is expected to indicate that companies, including non-manufacturers, are increasingly passing on higher costs into their prices.

The outlook DI is forecast to improve both among large manufacturers and among non-manufacturers.

NLI Research Institute said, however, that the outlook DI is unlikely to post a significant rise, due to persistent concerns over materials prices rising or hovering at high levels.