Morning Chronicle - Japan business confidence dips as Ukraine concern grows

The Bank of Japan's Tankan business survey -- a quarterly poll of about 10,000 companies -- showed a reading of plus 14 for major manufacturers, lower than the previous plus 17.

A positive figure means more manufacturers see business conditions as favourable than those that consider them unfavourable, and the survey is considered to be the broadest indicator of how Japan Inc. is faring.

The latest reading -- the first decline in seven quarters -- comes more than a month after Russia invaded Ukraine, starting a war that has pushed up raw material prices and triggered parts shortages.

"While (plus 14) is still not particularly weak by past standards, it suggests that supply shortages are still hampering some manufacturers," said Tom Learmouth, Japan economist at Capital Economics.

"Non-manufacturing sentiment held up better-than-expected during the Omicron wave and the labour market continued to tighten," he added.

"Indeed, we think output will rebound strongly in Q2."

Among large non-manufacturers, confidence fell to plus nine from plus ten.

For medium-sized manufacturers, confidence halved to plus three, while sentiment for small companies sank to minus four from minus one.

Japan's top government spokesman said Friday that major manufacturers' business confidence was still at a high level despite the drop.

"The situation reflects weakness in some areas, as the difficult situation caused by the pandemic remains," Hirokazu Matsuno said at a regular press conference.

The government is planning measures to cushion the impact of commodity inflation, he added.

Japan has seen a smaller Covid-19 outbreak than many countries, although cases surged due to the Omicron variant.

The country has recorded around 28,010 deaths despite avoiding harsh lockdowns.

C.Griffiths--MC-UK