Japan business mood subdued on uncertainty over China: Reuters Tankan

Mon Jul 20, 2015 10:59pm EDT
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By Tetsushi Kajimoto and Izumi Nakagawa

TOKYO (Reuters) - Confidence at Japanese manufacturers in July was subdued and the service sector mood dimmed the most in over a year, a Reuters poll showed, reflecting worries about sluggish consumption and exports as growth cools in major trading partner China.

The Reuters Tankan - which closely tracks the Bank of Japan's quarterly tankan survey - showed both manufacturers' and service-sector morale staying muted over the next three months.

The subdued sentiment joins a recent mixed batch of data that underlined the fragility of Japan's economy, and shows companies were far from assured about the outlook.

The poll of 516 big and midsize firms between July 1 and 15, of which 285 responded, showed business managers were worried about the state of China's economy - a major market for Japanese exporters.

"Asian markets centering on China are not performing very well. We have not felt a recovery in domestic markets related to private consumption either," said one chemicals producer.

The downturn in China's economy, which is on course to grow at its slowest pace in over two decades this year, has continued to hurt exports and manufacturing across much of Asia. In Japan, data in the past few weeks showed shipments and output weakening, but capital expenditure picking up.

"The worsening outlook index among the processing industries suggests the prospects for demand from China and Asia are not bright," said Yuichiro Nagai, economist at Barclays Securities.

"We expect a contraction in the second quarter. If the big drop in retailer's mood points to weakness in consumption, the economy may remain in a soft patch in the current quarter."   Continued...

File photo of a man using a mobile phone as he walks in front of a graph showing today's Nikkei share average movements outside a brokerage in Tokyo, June 9, 2015. REUTERS/Issei Kato