Reuters Tankan – Japan manufacturing sentiment negative for the first time in 10 months

Reuters Tankan report for December 2024, in summary:

• Manufacturers’ Sentiment Turns Negative: December index fell to -1, down from +5 in November, marking the first negative reading in 10 months.
• Non-Manufacturers’ Sentiment Improves: Index rose to +30 in December, up from +19 in November, with further improvement to +32 expected in March.
• Outlook for Improvement: Manufacturers’ sentiment is projected to rebound to +5 in March, while non-manufacturers’ sentiment is also expected to improve.
• Concerns in Manufacturing:
  • Key industries (electronics, steel, metals) reported significant declines in confidence.
  • Fears over U.S. protectionist policies and a prolonged Chinese economic slowdown are driving pessimism.
  • Managers cited delayed investment projects and intensified trade war concerns as key challenges.
• Service Sector Resilience:
  • Boosted by strong inbound tourism and improved ability to pass costs onto service prices.
  • Transportation firms noted higher profits despite labor shortages.
• Economic Indicators:
  • Japan’s Q3 GDP growth revised up to 1.2% annualized, driven by smaller declines in capital expenditure.
  • Consumption revised downward, highlighting the fragility of the recovery.
• Risks to BOJ Forecast: Manufacturers’ pessimism could challenge expectations of wage-driven recovery and inflation hitting the 2% target.

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Reuters Tankan is a monthly survey that seeks to track the Bank of Japan’s tankan quarterly survey

• respondents spoke on the condition of anonymity
• Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading means optimists outnumber pessimists.

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The Bank of Japan meet next week, 18 and 19 December.

This article was written by Eamonn Sheridan at www.forexlive.com.