July-September Witnesses a Boost in Business Sentiment.

14 Sep, 2023

July-September Witnesses a Boost in Business Sentiment.

A recent government survey has revealed a positive upswing in business sentiment among major Japanese companies during the July-September period. This improvement is largely attributed to the recovery in the automotive and manufacturing sectors. The survey, jointly conducted by the Finance Ministry and the Cabinet Office, reported that the business sentiment index for companies with capital of ¥1 billion or more increased from plus 2.7 in the previous quarter to plus 5.8.

A ministry official commented, "The outcome reflects a continued moderate recovery in the economy." The business sentiment index represents the percentage of companies reporting improved business conditions compared to the previous quarter, minus those reporting the opposite.

The positive trend extended to large manufacturers, with their index rising to plus 5.4 from minus 0.4, marking the first positive figure in four quarters. This boost in sentiment was largely driven by the easing of semiconductor shortages, which had previously hampered the auto industry.

For large nonmanufacturers, the index increased to plus 6.0 from plus 4.1, driven by the services and real estate sectors, thanks to the economy's reopening following the COVID-19 pandemic.

The survey also highlighted that the sentiment index stood at plus 6.1 for midsize companies and at minus 5.5 for small companies. Looking ahead, the index for major companies is expected to continue advancing, reaching plus 7.3 in October-December, before slightly declining to plus 6.2 in January-March 2024.

In addition to business sentiment, the survey also indicated that combined sales at all companies are projected to grow by 2.7% in fiscal 2023, which ends in March next year, compared to the previous year.

On another note, the Bank of Japan reported that producer prices in Japan increased by 3.2% year-on-year in August. This marked the 30th consecutive month of growth, primarily driven by higher crude oil prices. However, the rate of growth has been decelerating for eight consecutive months, reaching its lowest level since March 2021. The producer price index, which measures the costs of goods traded between businesses, reached 119.6 against the base year of 2020. This deceleration in growth is likely due to a slowdown in passing on higher costs to product prices, as well as government measures aimed at reducing the impact of rising electricity and gas bills on households.