Japan manufacturers' sentiment at 2-year low
Wednesday, September 19, 2007
JAPANESE manufacturers' sentiment reached a two-year low in September, a Reuters survey showed yesterday, suggesting that global market turbulence resulting from problems in the US sub-prime mortgage sector has taken its toll.
The data underscored expectations that the Bank of Japan (BOJ), which begins a two-day meeting yesterday, will be in no hurry to raise interest rates and helped to underpin Japanese government bond prices.
"Business sentiment was surprisingly weak across the board, confirming that corporate sentiment was hurt by concerns over the US economy, credit market jitters sparked by the sub-prime mortgage market problems and political uncertainty in Japan," said Mari Iwashita, a senior strategist at Daiwa Securities SMBC.
Sentiment among non-manufacturers matched the previous month's nearly three-year low, a sign that companies continue to struggle to cope with rising costs of raw materials.
The manufacturers' outlook index for December was plus 34, 10 points above their index for current conditions. But economists warned against reading too much into the strong reading as the outlook index tends to be upbeat.
The non-manufacturers' figure was plus 15, one point higher.
Cabinet ministers called on the BOJ to support the economy via monetary policy.
Financial markets have virtually discounted chances of a rate rise by the central bank this week given global market turmoil and weak Japanese economic data.
The Reuters Tankan, a monthly survey of leading Japanese firms that is designed to track the BOJ tankan, produced a diffusion index of plus 24 for manufacturing firms in September, the lowest since October 2005.
It was down six points from August.
The figure bodes ill for the BOJ's quarterly tankan, one of the most closely watched indicators in financial markets, which is due on October 1.
"If the BOJ tankan shows worsening business sentiment, it will raise another hurdle for the BOJ to raise rates in October. I personally expect the BOJ to raise rates early next year," said Yoshike Shinke, an economist at Dai-ichi Life Research Institute.
The BOJ's previous tankan, published in early July, showed that while big firms remained upbeat about business conditions, small firms were less optimistic as they found it hard to pass on rising raw materials prices to consumers.
Reuters
The data underscored expectations that the Bank of Japan (BOJ), which begins a two-day meeting yesterday, will be in no hurry to raise interest rates and helped to underpin Japanese government bond prices.
"Business sentiment was surprisingly weak across the board, confirming that corporate sentiment was hurt by concerns over the US economy, credit market jitters sparked by the sub-prime mortgage market problems and political uncertainty in Japan," said Mari Iwashita, a senior strategist at Daiwa Securities SMBC.
Sentiment among non-manufacturers matched the previous month's nearly three-year low, a sign that companies continue to struggle to cope with rising costs of raw materials.
The manufacturers' outlook index for December was plus 34, 10 points above their index for current conditions. But economists warned against reading too much into the strong reading as the outlook index tends to be upbeat.
The non-manufacturers' figure was plus 15, one point higher.
Cabinet ministers called on the BOJ to support the economy via monetary policy.
Financial markets have virtually discounted chances of a rate rise by the central bank this week given global market turmoil and weak Japanese economic data.
The Reuters Tankan, a monthly survey of leading Japanese firms that is designed to track the BOJ tankan, produced a diffusion index of plus 24 for manufacturing firms in September, the lowest since October 2005.
It was down six points from August.
The figure bodes ill for the BOJ's quarterly tankan, one of the most closely watched indicators in financial markets, which is due on October 1.
"If the BOJ tankan shows worsening business sentiment, it will raise another hurdle for the BOJ to raise rates in October. I personally expect the BOJ to raise rates early next year," said Yoshike Shinke, an economist at Dai-ichi Life Research Institute.
The BOJ's previous tankan, published in early July, showed that while big firms remained upbeat about business conditions, small firms were less optimistic as they found it hard to pass on rising raw materials prices to consumers.
Reuters
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