TOKYO– Business sentiment among major Japanese manufacturers deteriorated in the first quarter of this year, marking the fifth straight decline, according to a central bank survey released on Monday.
The main measure of the Bank of Japan’s quarterly survey called “tankan” showed that these sentiments stood at plus 1, compared to plus 7 in December. This is the worst quarterly result since December 2020.
Sentiment among major non-manufacturers rose one point to plus 20, the fourth consecutive quarter of improvement.
Japan’s economy has tended to stagnate in recent years, with slow wage increases, and has recently been hit by inflationary pressures, even as parts of the country’s economy continue to experience deflation, the reverse trend in which prices continually fall.
Uncertainty about global growth weighs on the export-dependent country. Adding to these woes is recent turmoil in the US banking sector, just as Russia’s war in Ukraine has driven up energy prices. Japan imports almost all of its oil.
The weaker yen boosts the value of overseas revenues from exporters like Toyota and Nintendo, but is proving to be a challenge for rising energy costs.
For the tankan sentiment projection three months later, the major builders expect a 2-point improvement to plus 3.
What the Bank of Japan might do on interest rates is being watched closely. The central bank has kept interest rates at zero or in negative territory for years to pull Japan out of its economic slump.
The key rate is now minus 0.1%. The BOJ is targeting stable price increases of 2%.
The bank’s new governor, Kazuo Ueda, whose appointment received parliamentary approval last month, is expected to take office on April 9, succeeding Haruhiko Kuroda, who served as Bank of Japan governor for a decade.
Ueda did not indicate that he would deviate from his predecessor’s positions. But he came from a university background, the first such governor in post-war Japan. Most previous governors had held positions in the central bank itself or in the Ministry of Finance.
Hopes are high that Ueda will be able to steer Japan toward a steady exit from “Abenomics,” the super-easy monetary policies championed by the late Prime Minister Shinzo Abe.
Prime Minister Fumio Kishida promises to increase people’s income and tackle the declining birth rate in the country. It is also seeking to increase defense spending and restart nuclear power plants to deal with the energy crisis.
Uncertainties like the war in Ukraine and the shortage of computer chips, a remnant of lockdowns and supply chain problems due to the coronavirus pandemic, have hit Japan hard. The nation must also develop new areas of growth to face global competition.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama