A recent Reuters poll reveals that business sentiment among major manufacturing companies in Japan could fall to the lowest levels seen since the 2009 global financial crisis during Q2 2020. The BOJ’s Tankan survey’s diffusion index for big manufacturers could fall to -31 for the current quarter from -8 in Q1 2020.
The last time the reading touched such a low level was back in September 2009. Meanwhile, big non-manufacturers’ index is also expected to register a steep fall, from +8 in Q1 2020 to -18 in Q2 this year, mainly driven by the lockdown which forced retailers to shut shop and keep consumers away.
The state of emergency declared by the Japanese government during April and May is expected to have worsened the business sentiment, forcing companies to close down their operations. While manufacturers are likely to suffer due to the sharp fall in external demand, the non-manufacturing sector sentiment has dipped due to weak levels of domestic consumption.
Economists also indicate that the sentiment among companies across both sectors could remain depressed into the next quarter as well, even after the lockdown restrictions have eased and economies have reopened. Capital spending among big companies in Japan is expected to rise to 2.1% in the current fiscal year starting in April, only slightly better than the 1.8% increase forecast back in March.