Photo/Illutration The Bank of Japan head office in Tokyo (Asahi Shimbun file photo)

Business confidence among large manufacturers improved for the first time in two quarters although U.S. tariffs dampened automakers’ sentiment, according to a new Bank of Japan survey. 

The diffusion index for large manufacturers edged up 1 point to plus 13 from three months earlier, according to the quarterly tankan survey for June, which was released on July 1.

The uptick reflected strong corporate performances as manufacturers were able to pass higher costs onto consumers, BOJ officials said, adding that factor outweighed uncertainties spawned by the Trump administration’s tariff policies.

The tankan covers about 9,000 companies. The diffusion index is calculated by subtracting the percentage of respondents who rate business conditions are poor from the percentage of respondents who say they are good.

A positive reading means that optimists outnumber pessimists.

By industry, the iron and steel sector’s index increased 15 points to minus 3, while the paper and pulp sector’s index rose 11 points to plus 29.

The Trump administration slapped a 25-percent tariff on steel and aluminum imports in March and doubled the rate to 50 percent in June.

However, the impact of the tariff remains unclear, while steelmakers’ business sentiment was buoyed by declines in material prices and increases in product prices, the BOJ said.

The automotive sector’s reading fell 5 points to plus 8.

The latest tankan, which collected responses between May 28 and June 30, was the first conducted after additional U.S. tariffs on automobiles took effect in April.

The diffusion index for large nonmanufacturers dipped 1 point to minus 34, which marked the first decline in two quarters.

The retail sector’s index dropped 3 points to plus 18, while the index for hotels, restaurants and other related services slipped 1 point to plus 45.

In addition to consumers tightening their purse strings due to the higher cost of living, concerns about cost increases and labor shortages affected nonmanufacturers’ business sentiment.

In the retail sector, consumption of large-ticket items has slumped, and demand from foreign tourists has shown signs of slowing, the BOJ said.

Both manufacturers and nonmanufacturers expect business conditions to worsen over the coming quarter, according to the tankan.

The diffusion index for business conditions for three months ahead slid 1 point to plus 12 among large manufacturers.

Among large nonmanufacturers, the index tumbled 7 points to plus 27.

Lingering uncertainties stemming from the U.S. tariff policies and concerns about economic slowdown are weighing on manufacturers, the BOJ said.

Nonmanufacturers face rising personnel costs and material prices, as well as labor shortages.

Related News