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- Reuters Tankan: Chip shortage and rising raw material costs have dampened corporate sentiment in Japan

Image: Reuters Berita 24 English - According to a Reuters poll, Japanese manufacturers' confidence was low in July due to pressure from ...

Image: Reuters

Berita 24 English - According to a Reuters poll, Japanese manufacturers' confidence was low in July due to pressure from a major chip shortage, China's vigorous pandemic response, and a weak yen that is making imported supplies more expensive.

The quarterly tankan survey conducted by the Bank of Japan is carefully followed by the Reuters Tankan, which indicated that both manufacturers' and service-sector morale would only moderately improve over the following three months.

The lacklustre mood adds to a recent jumble of data that highlights the economy's struggles to mount a solid rebound and demonstrates how businesses struggled to capitalise on rising demand, particularly at home.

Business managers were concerned about the effects of China's COVID-19 limits and a lingering chip and part shortage, according to a survey conducted of 495 large and midsize companies between June 29 and July 8; 248 replied.

The impact of China's lockdowns and the semiconductor scarcity, according to a manager at a manufacturer of transportation equipment, is having a negative influence on sales.

May saw the fastest output reduction in Japan's industries in two years, partly as a result of the negative effects of China's coronavirus restrictions, particularly in Shanghai.

Since there is still a chance of fresh COVID-19 limits, some analysts think it may take some time before Japanese industry, and especially the important auto sector, benefits from a revival in economic activity in Shanghai.

In July, the Reuters Tankan Manufacturing Sentiment Index remained constant at 9.

The indicator is predicted to nudge up to 13 in October, though much will rely on how things shake out in the autos/transport equipment subsector. In July, the sentiment remained incredibly depressing.

Due to wholesalers and information/communications, the service-sector index increased slightly from 13 in June to 14 now. In October, it was anticipated to increase to 18.

Overall service sector morale was hampered by retailers' flat mood and the negative real estate/construction attitude.

On July 20–21, the BOJ will meet to establish its upcoming policies.

In the three months leading up to June, according to the central bank's own tankan survey, the mood among Japan's major manufacturers deteriorated for a second consecutive quarter, in part because of the blow from growing input costs.

Business managers commonly noted rising energy and raw material prices in the Reuters Tankan survey.

A manager at a steel manufacturer wrote, "Our margins dropped due to the cost of raw materials and the weak yen."

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