TOKYO :Japanese business sentiment improved in the second quarter as raw material costs peaked and removal of pandemic curbs lifted consumption, a central bank survey showed, a sign the economy was on course for a steady recovery.
"While input prices have declined, output prices continue to rise in a sign companies are being able to pass on costs. That's a good sign for the BOJ's inflation outlook and may prod the bank to tweak its yield control policy later this year." Non-manufacturers' sentiment index improved to plus 23 in June from plus 20 three months ago, increasing for the fifth straight quarter and hitting the highest level since June 2019.
While the weak yen boosts exporters' profits, it may hurt retailers and service-sector firms vulnerable to the rising cost of food and energy imports. While inflation has exceeded its 2 per cent goal for more than a year, BOJ Governor Kazuo Ueda has repeatedly stressed the need to keep monetary policy ultra-loose until wages increase enough to keep price growth sustainably around the target.