Japanese producer sentiment worsened

The Japanese Tankan index, which measures the level of confidence among large processing companies, declined for the second quarter in a row after reaching a 13-year high at the end of last year. It is reported by Bloomberg.

In April-June, the index dropped to 21 points from 24 points in the previous quarter, according to the Bank of Japan.

Analysts surveyed by Bloomberg on average predicted a decline to 22 points.

The indicator has been declining for the second quarter in a row for the first time since Japanese Prime Minister Shinzo Abe took power in December 2012.

The index is expected to remain unchanged over the next three months.

While trade tensions overshadow the prospects for companies around the world, major manufacturers in Japan cited a shortage of workers and rising costs of materials as key sources of concern.

The confidence indicator of large non-manufacturing companies in the country in April-June rose to 24 points from 23 points in the previous quarter. The forecast assumed the indicator to remain at the level of I quarter.

Large companies in all sectors said they plan to increase fixed investment by 13.6% in the fiscal year, which will end in March 2019 (forecast: + 9.3%).

Large producers expect the average yen to be 107.26 per dollar in the fiscal year ending in March 2019.

The indicator of the sentiment of small companies in the processing industry decreased slightly and was at around 14 points. The confidence indicator of small non-manufacturing companies fell from 10 to 8 points.

The Tankan survey was conducted from May 29 to June 29 among 9,950 companies.

Right now, Japan’s super-rigid labor market is worrying big business more than the risk of a global “trade war.” This makes hiring more difficult and encourages companies to raise wages.

According to Vesti.Ekonomika, the unemployment rate in Japan, seasonally adjusted in May, fell to 2.2% from 2.5% in April and reached a minimum since 1992.

The ratio of the number of vacancies and job seekers in May was 1.6, peaking since 1974. This means that 100 job seekers in May had 160 open jobs.

Employment data indicates a stronger upward pressure on wages, which until now has reacted poorly to the super-rigid labor market. Companies hire more employees for full-time permanent contracts, which usually means higher salaries and bonuses.

The prospect of a wage increase that worries business so much is exactly what the government and central bank of Japan want to support household spending and stimulate inflation. Until wages for workers increase markedly, monetary policy in Japan will remain challenging.

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