Japan manufacturers’ mood up, tax hike still in doubt: Reuters Tankan

By Tetsushi Kajimoto

TOKYO (Reuters) – Japanese manufacturers’ morale improved in May for the first time in seven months, a Reuters poll showed, as recession worries eased, although companies were concerned about the impact of a planned tax hike on the economy.

The monthly poll, which tracks the Bank of Japan’s (BOJ) closely-watched tankan quarterly survey, found manufacturers’ mood expected to rise further over the coming three months.

The Reuters Tankan results came after data showed Japan’s growth surprisingly accelerated in January-March, driven by net contributions from exports, although declines in consumer and business spending underscored a fragile recovery.

Highlighting uncertainties, nearly two-thirds of companies saw growth remaining flat in the second quarter, nearly two-fifth saw it slowing and just 17 percent saw it accelerating, the Reuters monthly poll showed.

The mixed batch of data could keep alive speculation that Prime Minister Shinzo Abe may postpone a twice-delayed sales tax hike with 82 percent of firms in a Reuters poll seeing the world’s third largest economy as not fully prepared for the higher levy.

In the poll of 477 large- and mid-sized companies, many manufacturers voiced worry about the Sino-U.S. trade war, which has disrupted supply chains and hit Japan’s export-led economy.

“China’s market is on track for a recovery after slumping in the latter half of last year,” an electric machinery maker wrote in the survey.

“Uncertainty exists over the outlook on global economy, but I don’t think demand will fall sharply,” a transport equipment maker’s manager wrote.

Around 230 firms in the poll responded on condition of anonymity.

The sentiment index for manufacturers stood at 12 in May, up four points from the previous month, led by oil refiners, food processing firms, autos and precision machinery, according to the poll conducted May 8-17.

The index is expected to rise further to 15 in August.

The service-sector index grew to 27 in May from 24 in the previous month, led by information/communications, transport/utility and other service firms.

The index is expected to slip to 26 in August.

The BOJ’s tankan in April showed the business mood hit a two-year low in the March quarter, highlighting worries that global trade tensions and weakening world demand were taking a toll on confidence in the export-reliant economy.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists.

(Reporting by Tetsushi Kajimoto; Editing by Sam Holmes)

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