Tokyo Skytree and Mount Fuji are seen from the I-link Town observatory in Ichikawa city, Chiba prefecture, east of Tokyo on July 2, 2023.Japanese business sentiment improved in the second quarter as raw material costs peaked and the removal of pandemic curbs lifted factory output and consumption, a central bank survey showed, a sign the economy was on course for a steady recovery.
Companies expect to increase capital expenditure and project inflation to stay above the Bank of Japan's 2% target five years ahead, the quarterly "tankan" showed, offering policymakers hope that conditions for phasing out their massive monetary stimulus may be gradually falling into place. The headline index measuring big manufacturers' mood stood at plus 5 in June, bouncing back from a two-year low of plus 1 hit in March in a sign firms were recovering from the hit from rising raw material costs and supply disruptions. The reading, which compared with a median market forecast for plus 3, was the highest since Dec. 2022.
The sentiment index for big non-manufacturers improved to plus 23 in June from plus 22 three months ago, increasing for the fifth straight quarter and hitting the highest level since June 2019, the survey showed on Monday. "The results turned out a bit stronger than expected, helped by recovery in automobiles and energy sectors. Strong capital expenditure also led to brighter sentiment among machinery makers," said Atsushi Takeda, chief economist at Itochu Economic Research Institute.