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Japan Q3 manufacturers’ mood seen firmer, outlook flat in BOJ tankan

Japanese manufacturers’ business mood likely improved in July-September helped by an easing in COVID-19-related supply chain disruptions, a Reuters poll of economists showed.

The improved sentiment bodes well for the Bank of Japan (BOJ) as it maintained its ultra-low interest rate policy amid rising global rates at a Thursday rate review, prompting a subsequent plunge in the yen and the government’s intervention to support the currency for the first time since 1998.

The BOJ’s closely-watched “tankan” survey is likely to show the headline index for big manufacturers’ sentiment slightly increased to 11 in September from 9 three months ago, according to 14 economists polled by Reuters.

“While rising costs due to the weak yen and commodity inflation have squeezed profits in many sectors, the business sentiment ameliorated thanks to eased supply bottlenecks, especially among auto and machinery makers,” said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.

The big non-manufacturers’ sentiment index was unchanged at 13, however, as a resurgence in COVID-19 cases and accelerating inflation offset the positive impact of Japan’s economic reopening from the pandemic, the poll showed.

Analysts at Mizuho Research and Technologies expect manufacturers’ sentiment to stay unchanged for the rest of 2022 due to a sluggish auto production recovery, global economic slowdown and a stalled semiconductor market.

Big manufacturers’ index is forecast to be flat three months ahead, while service-sector firms will see a little improvement in their outlook, according to the poll.

Japan’s Prime Minister Fumio Kishida announced on Friday an easing in strict border control requirements for foreign tourists from mid-October, in a move capitalise on the benefits to tourism from a weak yen.

The tankan will also show big firms plan to increase capital expenditure by 18.8% in the fiscal year ending in March, slightly higher than an 18.6% gain in the previous survey, the poll showed, highlighting the robust state of business spending.

The BOJ will release the survey result on Oct. 3 at 8:50 a.m. local time (Oct. 2 at 2350 GMT).

Separate data on Japan’s factory output likely marked a slim 0.2% month-on-month rise in August, a third month of increase, according to the economists in the poll.

Retail sales in August likely grew 2.8% from a year earlier, following a 2.4% gain in July, the poll showed.

Jobs-applicants ratio and the jobless rate were expected to improve slightly in August, coming in at 1.30 and 2.5%, respectively.

The government will release the factory output data and the retail sales data on Sept. 30 at 8:50 a.m. (Sept. 29 at 2350 GMT). Jobs data is due on Sept. 30 at 8:30 a.m. (Sept. 29 at 2330 GMT).
Source: Reuters (Editing by Jacqueline Wong)

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