Japanese manufacturers' sentiment worsened amid weak yen

According to the quarterly Tankan survey reflecting the business confidence index, for the first time in almost 2 years the optimism of Japanese manufacturers has disappeared. On the other hand, the service sector is recovering its positive mood, this hasn’t been seen for 3 years. Thus, Japan's economy remains unstable.

The survey revealed a certain tendency. Respondents involved in manufacturing hope for improvement in the business situation within 3 months, whereas respondents working in the service sector don’t think there will be a global change. Economists point out that the cost of living has risen several times as the yen has fallen. In this regard, Japan's economy slowed significantly in the previous quarter.

In such circumstances, households and businesses aren’t always able to cope with ever-increasing costs on their own. The Japanese government has allocated 29.1 trillion yen ($198 billion) to help them. However, not everyone believes that such support will have a positive effect on the country's economic growth. Since the country has a high percentage of borrowing itself, such programs can only harm. 

Worries about the weak yen haven’t subsided. Many large companies are worried that the weak national currency is driving up the cost of imports. Moreover, there are worries about the shortage of automotive components and the slowing Chinese economy, which could have an adverse effect.

The sentiment index of manufacturers was plus 2, the lowest since January last year, according to the survey. In the previous month, the index was plus 5. However, forecasts remain positive and predict a recovery in the index to plus 7.

The service sector index rose 5 points to plus 20, the best reading in 2 years. The index is unlikely to decline significantly in the next three months. Only a one-point drop to plus 19 is expected.