According to a central bank survey released on Tuesday, big Japanese manufacturers’ business confidence fell to a one-year low in the three months to March. This indicates that increasing trade tensions were already affecting the export-reliant economy.
The melancholy contrasted with the morale of major non-manufacturers, which rose to levels not seen since 1991 as a result of surging revenues from inbound tourism and cost pass-through via price increases.
However, the quarterly “tankan” survey revealed that both manufacturers and service-sector enterprises expect business conditions to stagnate or worsen in the coming three months due to weakening global demand, rising prices, and uncertainty about US tariffs.
The survey, conducted before US President Donald Trump’s declaration last week of plans to slap tariffs on auto imports, demonstrates how foreign headwinds are complicated the BOJ’s decision on the timing of future interest rate hikes.
According to Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, companies have not fully priced in the impact of US tariffs, which is raising concern but has not yet had a direct impact on profitability. With firms delivering decent pay raises and no major surprises from the tankan, the BOJ is unlikely to rethink its policy of gradually raising interest rates,” he added.
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