Natural disasters and trade problems undermine the confidence of Japan Inc companies: tankan

TOKYO (Reuters) – Rising commodity prices and a series of natural disasters that disrupted production undermined the confidence of Japanese automakers in September, according to a central bank survey.

The survey gave little guidance on the underlying sentiment that had been affected by the escalating global trade frictions. However, the specter of a full-fledged trade war has weighed on business business prospects, which could threaten otherwise vibrant capital spending, a positive point of the world's third largest economy.

The survey cast doubt on the Bank of Japan's view that strong economic expansion would help accelerate inflation to its elusive target of 2%, although there were signs that companies were gradually transferring costs to their customers.

"The sentiment is stabilizing because of the slowdown in exports and the weakening of factory production because of worries related to a global trade war," said Takeshi Minami, chief economist of the Institute's Norinchukin research.

"Nevertheless, the level of feeling is high. I also do not think it will continue to deteriorate, given improved earnings and higher prices. "

The overall builders confidence index fell to over 19 in September, up from 21 three months ago, according to a BOJ survey, deteriorating for three consecutive quarters and below the median market forecast for more than 22.

The index for non-manufacturers fell 22 to 24 in the June survey, which corresponds to a median market forecast and deteriorated for the first time in eight quarters.

The two major manufacturers and non-manufacturers expect that commercial conditions remain unchanged three months in advance, the survey revealed.

Investors took the deteriorating weather of the tankers in their stride, pushing Japan's N225 average of action to a 27-year high on Monday, while a prolonged weakening of the yen helped boost prospects of export receipts of Japanese companies.

CAPEX SOLID

In spite of the somewhat moderate commercial atmosphere, the last tankan highlighted strong business investment plans driven by demand for capacity upgrades and investments in robotics and automation.

Large companies plan to increase their capital expenditure by 13.4% for the current financial year ending in March 2019, compared with 13.6% in the previous Tankan survey.

The investment plans of all companies increased by 8.5 percent during the year, which is close to the pace observed during Japan's economic bubble period, said Minami.

"There is still room for improvement in light of the fact that small businesses now specify their profits, although this will depend very much on how the effects of a trade war will affect the business climate," she said. he declared.

As an encouraging sign of the fight against deflation led by Japan, the survey showed that companies were better able to pass on the costs, the index measuring the evolution of production prices to more than 7 for major manufacturers, the highest level in a decade.

Highlighting the tightening labor market, the study index measuring employment conditions in large firms reached the minus 23 mark, the tightest level since 1992.

The Japanese economy rebounded in the second quarter, after a contraction from January to March, thanks to strong corporate spending.

But a summer of growing trade frictions and natural disasters having disrupted supply chains is clouding the prospects of an export-dependent economy.