Japan: Business sentiment plummets in Q1 and prospects appear bleak
According to the Bank of Japan’s quarterly Tankan business survey, which was conducted from 25 February to 31 March, sentiment among large manufacturers regarding current business conditions fell in the first quarter to minus 8, down from 0 in the fourth quarter and representing the lowest reading in seven years. The sentiment value is calculated by subtracting the number of respondents who say economic conditions are improving from the number of those who say they are deteriorating.
The decrease in business sentiment among large manufactures in Q1 was broad-based, although the fall was most pronounced among those who produce ships, motor vehicles and heavy machinery. Confidence among large non-manufacturing firms fell to 8 in Q1 from 20 in Q4. The lower readings in Q1 were likely in large part due to the global coronavirus pandemic restricting both economic activity and the ability of businesses to plan for the future.
Regarding the outlook, sentiment among large manufacturers regarding business conditions in the second quarter was minus 11, down from the current reading of minus 8. Sentiment among large non-manufacturing firms was minus 1, down from the current reading of 8. In short, businesses clearly expect already-difficult operating conditions to worsen in the coming months.