BANGKOK (AP) According to a quarterly study conducted by Japan’s central bank, business mood has somewhat improved, particularly in large, heavy industries like machinery, auto manufacturing, and fossil fuels. In contrast, the services sector was less optimistic.
The Bank of Japan’s decision to boost its benchmark interest rate next week may be influenced by the tankan survey, which was released on Friday. It demonstrates how businesses who claim to be optimistic about business circumstances differ from those that claim to be pessimistic.
Expectations for a rate hike were dampened by the results of the most recent poll, and the Japanese yen declined. On Friday, the U.S. dollar was trading at 152.90 yen, which was close to its highest level in two weeks. The benchmark Nikkei 225 stock index, meanwhile, experienced a decline of over 1%.
For the fourth straight meeting, the BOJ is expected to keep its short-term interest rate at 0.25% next week, according to a report from IG.
With the support of consistent consumer spending, Japan’s economy expanded at a revised 1.2% annual pace in the most recent quarter. However, U.S. President-elect Donald Trump has pledged to raise taxes on imports from numerous nations, which might shock the regional and global economies, making the future uncertain, according to IG experts.
Toh Au Yu of Capital Economics stated in a commentary that after a decline in the previous quarter, the modest improvement in business conditions across all firm sizes in the most recent tankan indicates that activity is unlikely to rise much this quarter.
According to Toh, one of the main challenges facing Japanese businesses is a severe labor shortage as the workforce declines in tandem with the country’s population. As in the previous quarter, the tankan displayed a negative 36 sentiment for employment.
Overall business sentiment for manufacturers and non-manufacturers, however, increased slightly from 14 in the last survey to 15.
Large manufacturers’ confidence index increased from 13 in September to 14 in December, in part because automakers started up again after industry certification problems.
Real estate and construction also improved.
Although it stayed in positive territory, sentiment among merchants and other service businesses declined, dropping from 34 to 33, while automakers and other large companies gained momentum.
The retailer index fell precipitously from 28 to 13.
In order to assist the economy as the country’s population declines and demand is reduced, the Bank of Japan started to abandon its negative interest rate policy early this year. In order to combat a protracted period of deflation, during which demand was so weak that prices dropped, the ultra-lax monetary policy was maintained for years.
However, the COVID-19 pandemic-related worldwide price hikes and the depreciation of the Japanese yen relative to other currencies have caused prices to rise over the BOJ’s inflation target of roughly 2%, allowing it to start adopting a more traditional approach.
Due to high import expenses caused by the weakening yen and rising energy prices, Japan recorded a trade deficit in October for the fourth consecutive month.
In order to increase consumer spending, Prime Minister Shigeru Ishibahas suggested expanding Japan’s basic tax-free income allowance, enhancing take-home pay, and providing low-income families with subsidies.
However, his minority government will probably have trouble winning over the opposition to its budget and other bills, which might lead to political impasses that impede economic plans.
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