Japanese Manufacturing Giants' Business Sentiment Recovers to Pre-COVID-19 Levels

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] A survey has revealed that the business sentiment of major Japanese manufacturing companies has recovered to pre-COVID-19 levels.

According to the "March Nationwide Short-Term Economic Survey of Enterprises" released by the Bank of Japan on the 1st, the business conditions diffusion index (DI), which reflects the business sentiment of major manufacturing companies, surged 15 points from the December survey last year to record 5.

The DI is calculated by subtracting the percentage of companies responding that conditions are "bad" from the percentage responding that conditions are "good."

A positive (+) DI indicates that more respondents view the economic situation optimistically.

This is the first time in a year and a half since the September 2019 survey that the DI for major manufacturing companies has been positive, and the index has improved for three consecutive quarters.

By detailed industry, the DI for the automobile sector jumped 23 points to 10.

The electrical machinery, steel, and non-ferrous metals sectors also showed signs of recovery, with 13 out of 16 major industries seeing improvements in their DI.

The Nihon Keizai Shimbun analyzed, "Judging by the DI alone, the business sentiment of major manufacturing companies has returned to the level before the full-scale COVID-19 outbreak that began in January last year," adding, "The recovery of the global economy and the weak yen trend improving export conditions have been positive factors for the business sentiment of major manufacturing companies."

However, the overall DI for non-manufacturing large companies, including service industries such as accommodation and food services that have been heavily affected by COVID-19, rose 4 points from three months ago in this survey but remained in negative territory at -1.

In particular, among non-manufacturing sectors, the DI for accommodation and food services dropped sharply by 15 points to -81 due to the re-declaration of a state of emergency in the Tokyo metropolitan area and other regions in January this year to respond to COVID-19.

Personal services such as leisure facilities also fell 8 points, recording -51.

On the other hand, the DI for the information services sector, which has prospered due to the impact of telecommuting, rose 8 points to 31.

Meanwhile, in this survey, the DI for all industries among Japanese small and medium-sized enterprises rose 6 points but remained in negative territory at -12, confirming a significant difference in business sentiment between large and small-to-medium enterprises.

This survey was conducted from February 25 to the end of March, targeting approximately 9,500 companies across Japan.

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