Japanese manufacturers pessimistic for the first time in more than 6 years: survey

Japanese manufacturers’ mood turned negative in August, marking a pessimistic view on business prospects for the first time in more than six years, amid the United States (US)-China trade war tensions and the growing risk to a US recession.

Manufacturers were moody on the manufacturing sector’s prospects with a negative 4 reading in August, an extended downward reading for the third-straight-month and the first contraction in over six years, the monthly Reuters Tankan poll showed on Monday. The contraction is the weakest reading since April 2013.

The monthly poll, which tracks the Bank of Japan’s tankan quarterly survey showed that the reading was dragged lower by products such as food processors, metals, electric machinery, and transport equipment. A negative reading reflects that the pessimists within the industry outnumber the optimists.

The confidence in the service sector was also weaker, as it fell from a positive 25 points in the previous month to a positive 13 points. A rise in domestic sales tax is due in October and is likely to put additional strain to the sector’s growth going forward.

The US-China trade war, Japan’s export curbs to South Korea and the recent rise in the Japanese yen have formed a bottleneck for sales,’ said an unnamed electric machinery maker manager in the survey.

Another retailer manager gave the feedback that the ‘selling price (of goods) remains in a downtrend due to expansion of e-commerce markets, while a scheduled sales tax hike keep shoppers on guard against price increases’.

The survey polled 504 large-and-mid-sized firms with 258 firms responding in anonymity.