Japan Business Sentiment:

 Article Source: https://mainichi.jp/english/articles/20220613/p2g/00m/0bu/025000c

Article:

TOKYO (Kyodo) -- Business sentiment among major Japanese companies in the April-June period was negative for the second consecutive quarter as Russia's invasion of Ukraine drove oil prices higher, government data showed Monday.

The confidence index covering firms capitalized at 1 billion yen ($7.4 million) or more logged minus 0.9, compared with minus 7.5 in the January-March period, dragged down by a plunge in auto-related manufacturers at minus 25.4, according to the joint survey by the Finance Ministry and Cabinet Office.

The sector was hit by a decrease in production due to parts supply shortages.

Ideas:

Japanease sentiment among major Japenese companies always seems to be not so good and they seem to never have a positive outlook related to the Japanese economy. 

As maybe good reasons as the Japanese economy never seems to get past 1 percent economic growth in recent times.

And now with increasing energy and raw prices cotinuing to increase business sentiment most likely is not going to increase much in the near future.

At the time it must be remembered the Japanease economy, even among large companies is very complex and very diverse which means there are always going to be some positives and even some negatives in the economy and as a market economy some companies will feel good about what is happening and even some companies might feel better about what is happening.

Article:

The figures are calculated by subtracting the percentage of firms reporting worsening conditions from those observing improvements.

The index for manufacturers stood at minus 9.9, compared with minus 7.6 in the previous quarter, while the index for nonmanufacturers swung back to plus 3.4 from minus 7.4.

Among nonmanufacturers, the transport and services sectors observed a return of customers compared with the worst stage of the coronavirus pandemic.

Business sentiment among smaller firms capitalized at 100 million yen or more but less than 1 billion yen also remained negative at minus 2.1, compared with minus 9.6 in the previous quarter.

Ideas:

Most likely manufacturers have seen their raw material prices and their energy prices continue to increase which means their profit margins continue to decrease. Their overall sales might be the same or even better than the pandemic period but increases in energy and material costs have challengesd their profit margins which might cause them to not feel so good about the economy or future economy.

Among nonmanufacturers it woud obviously be natural for them to feel better about economic conditions even though their energy costs might have increased too.

With smaller firms its always a challenge for many reasons. Their sentiment might have improved from 9.6 to 2.1 but there always challenges for them as they don't have the resources to overcome different external factors that they might encounter compared to larger firms which have more resources.

Article:

That of corporations capitalized at 10 million yen or more but less than 100 million yen stood at minus 14.8, compared with minus 26.2.

"While the impact of the pandemic has eased, supply limitations and rising raw material prices led to overall negative sentiment," a ministry official said.

Looking forward, the index forecasting business conditions for large firms in the three months through September was plus 6.3, and that for the following quarter stood at plus 6.4.

Ideas:

While the pandemic might be easing some and there is more economic activity supply challenges continue and probably are going to continue even more because of the Ukraine situation.

The semiconductor chip shortage is far from over and according to a BBC article last summer a German CEO of a car company said he estimates the chip shortage to last at least two years.

Rising material costs are another major concern. It might not be possilbe or even doable for companies to look for other material sources if they are locked into long-term material contracts. 

And even if they wanted to find new sources or materials most likely the increase in material costs are across the board meaning material costs for all suppliers are increasing at the same time.

Index forecasting or estimating what is going to happen or even what might happen or what companies think about the future is not an exact science as everything is still a guess. 

Even today with the most sophisticated data science analytics no one can perfectly predict the future as the past two to three years have proven econonmic conditions and situations can change very fast and what is happening now could be completely different in six months.

Article:

That of firms with capital of 100 million yen or more but less than 1 billion yen logged plus 6.2 for the July-September period, and plus 8.1 for the following quarter.

That of firms capitalized at 10 million yen or more but less than 100 million yen stood at minus 3.3 for the July-September period and minus 1.7 for the following quarter.

Investment in plant and equipment among all industries is expected to increase 16.0 percent in fiscal 2022 from a year earlier, the sharpest rise since the government started the survey in 2004.

Ideas:

Again, no one can perfectly predict what is going to happen six months from now as the world is changing too fast including what is happening in Japan. The last two or three year has been unprecendented in history and what is going to happend related to economic conditions is just not easy to predict. 

The supposed 16 percent increase in investments in plant and equipment at an increase  should not be a surprise as maybe a year earlier companies were waiting or hoping for better economic conditions or a better economic environment in which to invest in.

But again the 16 percent is just a guess. For example in six months time or even 9 months time the Japanese economy and economic conditions or situation might not be so good and companies might again decide to wait until conditions improve.

Its very difficult to predict accurately as predictions are based on what might be in the future and no one, even with past economic data or past economic history can predict what is going to happen 6 to 9 months from now. 

Just how could any business have predicted the pandemic exactly, who could have predicted this much inflation exactly, who could have predicted the semiconductor shortage exactly, who could have predicted the Ukraine situation and its affects globally six months before they all happened. 

Article:

The increase was attributable to a wave of electrification of cars and the resumption of investment by retailers and wholesalers.

The survey covered 911,098 companies capitalized at 10 million yen or more, with about 11,000 firms responding by May 15.

Ideas:

These predictions, hopefully, are going to happen and maybe the Japanese economy will improve and businesses will continue to feel good about what is happening at this present time and what is going to happen in the future.

Despite the increase in inflation related to energy cost and raw material costs and some companies passing on their costs to consumers that the Japanese economy will begin to get back to some kind of normal or at least a new normal.

But the Japanease economy is not going to ever get back to where is was in 2019 because of the 31 plus million international tourists that went to Japan in 2019. 

That is just too much spending in the Japanese economy that can't be overlooked if the Japanese government and the Bank of Japan wants the Japanese economy to grow at a significant rate. 

Have a nice day and be safe!