TOKYO – Business confidence among Japan’s major manufacturers improved to its highest level in eight years in June as strong demand for semiconductors and artificial intelligence offset risks from Middle East conflicts, the Bank of Japan’s Tankan survey showed on Wednesday.
The sentiment index, which measures confidence in companies in the automobile, electronics, and other sectors, rose to 22 from 17 in March, marking the fifth consecutive quarter of increase and exceeding the average market estimate of 16 compiled by Kyodo News.
However, the index is expected to fall to 17 in September. The Bank of Japan’s survey was conducted among 9,141 companies between May 28 and Tuesday, with responses received from about 70% by June 11, before the preliminary agreement between the United States and Iran to end the war.
A Bank of Japan official said at a press conference that even if an agreement is reached, “it will take time” for companies to adjust their plans.
Bank of Japan officials said a wide range of industries remained concerned about the fallout from the war, which caused oil prices to soar and disrupt energy supplies. The United States and Israel began war on February 28th.
The official said orders for chip-making equipment and related materials were strong from companies in the general-purpose, production, commercial and electrical machinery sectors, as well as non-ferrous metals, steel, chemicals and textiles.
More companies are passing on higher material costs to retail prices to prevent a squeeze on profits, the people said, while some sectors are benefiting from orders brought forward to ensure supply.
He said some companies expressed concern that the situation in the Middle East could disrupt procurement, leading to further increases in material costs and reductions in capital spending.
Confidence among chemical manufacturers improved from 14 to 20, while confidence among production machinery manufacturers rose 10 points to 36. The petroleum and coal products sector deteriorated from 18 to 9, and the automobile sector also fell by 1 point to 12.
The index for large non-manufacturing industries, including service industries, was 37, up from 36 in the previous survey in March, marking the first improvement in five quarters.
The accommodation and food services sector benefited from the increase in inbound tourists, with sentiment rising from 34 to 46.
According to the official, the construction and real estate sectors were depressed due to rising material prices due to the situation in the Middle East.
According to the data, all companies, including small and medium-sized enterprises, raised their inflation forecasts for one, three, and five years by 0.1 percentage points to 2.7%, 2.6%, and 2.6%, respectively.
The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage of companies reporting unfavorable conditions.
