Tankan survey
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
The ‘Tankan’ survey, an economic survey of Japanese business sentiment issued by the central Bank of Japan (BoJ), captures perceptions of current trends and conditions in respective industries each quarter. It is looked at closely because it encompasses many businesses and is treated seriously by respondents.
Issued on Monday the survey reveals that, business sentiment among large manufacturers dipped for the first time in two years. This appears to reflect concerns in the business community over the currently destabilising US trade policy and a stronger yen making it harder for Japan’s industrialised economy to sell its goods overseas.
The survey highlights the manufacturing index for large businesses declining by two index points. Large non-manufacturers also declined by the same margin.
Click here for the full report.
We note that deeper in the survey, sentiment for all companies across all industries increased, albeit slightly, rising from 16 to 17 (note that a figure greater than 0 is indicative of the economy growing). With small and medium sized companies less dependent on exporting goods and services, potential yen headwinds are likely to have kept their confidence levels elevated, balancing out the drop-in sentiment surveyed by larger firms.
So, while the survey overall points to a growing economy sentiment is being hampered by perceptions that Trump may force the BoJ’s hand towards a strong currency policy. He is meeting Prime Minister Shinzo Abe later this month where some think he may accuse Japan of keeping the yen artificially weak through its ultra-easy monetary policy. In January 2017, Trump alleged that Japan used its “money supply” to weaken the yen and give exporters an unfair advantage.
Time will tell whether Trump will turn his attention to Japan, America’s fourth biggest trading partner, putting a potential $210 billion of trade at risk. With the BoJ yet to start reducing its quantitative easing program, a weaker yen is expected to persist, supporting demand for Japanese goods and services.
