Japan business mood worsens on hit from China's lockdown, rising costs

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The mood among Japan's big manufacturers' soured for a second straight quarter in the three months to June, a central bank survey showed on Friday, hit by rising input costs and supply disruptions caused by China's strict COVID-19 lockdowns.

But confidence among big non-manufacturers improved in the quarter, the "tankan" quarterly survey showed, suggesting service-sector firms are shaking off the drag from the pandemic as the government lifts curbs on activity.

"But manufacturers expect to see profits fall, which could affect their spending plans ahead. Rising input costs and prospects of slowing U.S. growth also cloud the outlook." The big non-manufacturers' sentiment index improved to plus 13 in June from plus 9 in March, just below a median market forecast of plus 14.

Japan's economy likely stalled in the current quarter as China's strict COVID lockdowns, soaring raw material costs and supply chain disruptions hurt factory output. Data on Thursday showed output fell the most in two years in May.Policymakers are hoping that consumption will rebound from the pandemic's drag and offset the weakness in manufacturing activity. But the yen's recent plunge is pushing up prices of imported fuel and food, adding pain for households.

 

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