Business sentiment among major Japanese manufacturers rose in March, according to the Bank of Japan’s quarterly tankan survey released on Wednesday. The diffusion index improved from 16 to 17, marking the fourth consecutive quarterly increase.
The improvement comes despite growing worries about Japan’s economic growth and oil supplies due to the US-Israeli war on Iran. The survey measures the percentage of companies expecting favourable conditions minus those anticipating unfavourable ones.
For large non-manufacturers, such as the service sector, the index remained unchanged at 36. Japan’s inflation has stayed relatively moderate, but concerns are mounting over rising fuel and product prices. Investors and consumers face uncertainty over the war’s duration and potential comments from US President Donald Trump. The benchmark Nikkei 225 has experienced wild fluctuations in recent weeks.
Analysts suggest the Bank of Japan may raise interest rates due to inflation worries, driven by soaring energy costs and a declining yen, both of which significantly affect living costs. Historically, a weak yen benefited Japan’s exports, but it now poses challenges as the country imports much of its energy, food, and manufacturing components.
The central bank maintained its interest rate at 0.75 per cent in March, following years of negative rates to combat deflation. The next monetary policy meeting is scheduled for April 27 and 28.
