Japanese Major Manufacturing Firms' Business Sentiment Turns Negative for First Time in 7 Years... Impact of COVID-19

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[Asia Economy Reporter Jeong Hyunjin] The manufacturing business sentiment among major Japanese corporations has hit its worst level in seven years. This indicates that an increasing number of Japanese companies are being affected by the global economic slowdown due to the spread of the novel coronavirus infection (COVID-19).

According to the March Nationwide Short-Term Economic Survey of Enterprises (Tankan) released by the Bank of Japan (BOJ) on the 1st, the business conditions diffusion index (DI), which reflects the business sentiment of Japanese companies, was recorded at minus (-) 8 for large manufacturing firms. This index was 0 in the previous survey conducted in December last year. The DI has been negative for the first time in seven years since the March 2013 survey (-8). The DI is calculated by subtracting the percentage of companies responding "bad" from those responding "good" regarding business conditions. A negative value means that the proportion of companies answering "bad" is higher.

Considering that the survey period for businesspeople was from February 25 to the end of last month, these results are interpreted as reflecting the impact of COVID-19 on real and financial markets worldwide, including the United States and Europe. By industry within manufacturing, automobiles recorded -17, shipbuilding and heavy equipment -29, and non-ferrous metals -26.

The business sentiment of large non-manufacturing companies also deteriorated. The DI for large non-manufacturing firms, which was 20 in the previous survey, dropped to 8. In particular, the accommodation and food service sector sharply declined from 11 to -59 during the same period due to the sharp decrease in inbound tourists to Japan.

The outlook for business conditions over the next three months was even worse. The DI for large manufacturing firms’ business conditions three months ahead was -11. The Nihon Keizai Shimbun reported that concerns about the future economy are spreading, considering that COVID-19 is unlikely to end soon.

This content was produced with the assistance of AI translation services.