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Japan manufacturers less confident as high material costs bite: Reuters poll

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TOKYO : Japanese manufacturers are markedly less confident about business than three months ago due to higher materials costs, the Reuters Tankan poll for June showed, though the index remained in positive territory for a fourth straight month.

The results of the monthly poll – a leading indicator for the Bank of Japan’s (BOJ) closely watched tankan quarterly business survey – underscore the uneven nature of the country’s economic recovery. The next BOJ tankan will be released on July 1.

The manufacturers’ sentiment index declined to +6 from +10 three months ago and from +9 in May, with firms hurt by a yen that is trading near 34-year lows and inflating costs of raw materials that resource-poor Japan needs to import from abroad.

“Passing on materials costs to customers and the increase in labour costs are sapping appetite for capital expenditure and other spending,” a machinery maker manager wrote in the comment section of the poll.
Some manufacturers also expressed concerns about the knock-on effects of a scandal in the auto industry where Toyota, Mazda and others have acknowledged irregularities in vehicle certification tests.

“The business environment surrounding industrial machinery is clearly changing for the worse,” wrote a manager in the auto sector. “It’s unclear how the certification issue will affect our business.”

That said, manufacturers overall were a bit more upbeat about the months ahead and the index is expected to rebound to +9 in September.

The non-manufacturers index climbed to a three-month high of +31 in June. That was up five points from May but one point lower than three months ago. It is expected to stay at +31 in September.

The Reuters Tankan poll was conducted June 5-14. Some 500 large non-financial companies were surveyed on condition of anonymity and roughly 230 firms responded.

The indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists.Source: Reuters

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