Semiconductor shortages, China’s continuing Covid-19 outbreaks and a weak yen have dampened confidence at Japanese manufacturers in July.
The Reuters Tankan – a poll of 248 responses from big and midsize firms between June 29 and July 8 – showed sentiment among Japanese manufacturers and the services sector was improving only modestly about the next three months.
The subdued sentiment adds to a recent mixed batch of data that underlines the economy’s difficulty to stage a robust recovery, and shows that companies struggled to benefit from improving demand, particularly at home.
“Our sales are declining due to the impact of China’s lockdowns and the semiconductor shortage,” a manager at a transport equipment producer said.
Japanese manufacturers cut output at the fastest rate in two years in May, largely due to adverse effects from China’s coronavirus restrictions, such as in Shanghai.
Some analysts believe it may take time before Japanese manufacturing and especially the key car sector will benefit from a recovery of economic activity in Shanghai, as the risk of new Covid-19 curbs remains.
The Reuters Tankan sentiment index for Japanese manufacturers held steady at 9 in July. The index is seen rising to 13 in October.
The service-sector index inched up to 14 from 13 in June, driven by wholesalers and information and communications. It was expected to rise to 18 in October.
- Reuters, with additional editing by George Russell