Japan business confidence falls in August as China slows: Reuters poll

TOKYO: Japan’s manufacturers’ confidence about business conditions fell slightly in August and confidence in the services sector also weakened, the Tokyo-based company found on Wednesday (Aug 14) as sluggish demand from China weighed on corporate sentiment.

The poll was taken after the Bank of Japan raised interest rates to a 15-year high last month and unveiled detailed plans to slow its massive bond-buying program.

Manufacturers’ sentiment slipped to +10 in August, down 1 point from July, according to the Reuters Tankan poll, which closely tracks the Bank of Japan’s quarterly business survey.

Manufacturers expect the index to fall further to plus five in the next three months, the survey showed.

“Auto sales are sluggish, especially in China,” a manager at an automobile and transport machinery company wrote in the survey.

Managers in a range of industries, including chemicals, steel and electronic machinery, said sluggish Chinese demand had affected their business confidence.

Rising inflation and market volatility were also concerns, the survey found.

“Uncertainties such as raw material costs and foreign exchange rates are increasing,” wrote a manager at a rubber company.

The Reuters poll was conducted from July 31 to August 9, during which Japanese stocks suffered their biggest one-day drop since the Black Monday sell-off in 1987 as weak U.S. labor data stoked recession fears, while the yen surged against the dollar as investors unwound carry trades.

The Reuters Tankan services index fell for the second straight month, to +24 in August from +26 in July. Non-manufacturers expect the index to rebound to +26 in November. Strong external demand supported sentiment in the sector.

The Reuters Tankan Index is calculated by subtracting the proportion of pessimistic responses from the proportion of optimistic responses. A positive number means that there are more optimists than pessimists.

A total of 506 large non-financial companies were surveyed, of which 243 responded anonymously in the August survey.