Japanese Business Conditions Index Improves for Second Consecutive Quarter... "Impact of COVID-19 Remains"

Large Manufacturing Business Condition Index Records '-10' in Q4

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The sentiment among Japan's large manufacturers, which had been hit hard by the novel coronavirus infection (COVID-19), improved for the second consecutive quarter.

According to NHK and others on the 14th, the Bank of Japan (BOJ) announced the results of the nationwide Short-Term Economic Survey of Enterprises (Tankan) conducted that day, reporting that the business conditions index for large manufacturers in the fourth quarter was minus (-) 10. This figure exceeded the Bloomberg consensus forecast of -15 and showed improvement compared to the third quarter's business conditions index (-27).

The Tankan business conditions index is calculated by subtracting the percentage of companies responding that conditions are "bad" from the percentage responding that conditions are "good." A positive (+) value indicates that more companies feel the business climate is favorable. The fourth quarter Tankan business conditions index for large manufacturers showed improvement for the second consecutive quarter. The Nihon Keizai Shimbun explained that this reflects the recovery in exports and production activities in the United States and China.

By industry, the business conditions index improved in 15 out of 16 sectors within the large manufacturing category. The largest increase was seen in the automobile sector, while steel, non-ferrous metals, and production machinery also showed some recovery in sentiment. However, the Nihon Keizai Shimbun reported that shipbuilding and heavy machinery sectors experienced a deterioration in their business conditions index. Among large service industries, 11 out of 12 major sectors showed an upward trend.

Nevertheless, despite this recovery, the sentiment among Japanese companies remains subdued compared to the pre-COVID-19 period. Although the fourth quarter sentiment exceeded expectations, it remained at a lower level than before the pandemic. NHK reported, "As COVID-19 spreads again, the outlook for corporate business conditions continues to face difficulties."

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