BUSINESS-ECONOMY
Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance. Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance. The survey, which captured responses from 506 large non-financial firms, came out just two weeks ahead of the policy review by the Central Bank of Japan on July 30-31. Much attention is now focused on the BOJ for hints on impending interest rate hikes as the central bank raised rates in March for the first time since 2007 and trimmed bond-buying last month. The BOJ will keep a close watch on its own tankan survey, short-term outlook data, and indications from other leading economic indicators that could confirm the sustainability of inflation and strong household consumption—perhaps driven by wage hikes. This could mediate their case for further rate hikes. The Reuters Tankan survey, which closely tracks the BOJ's tankan, demonstrated that the sentiment index for manufacturers jumped by five points from June to stand at plus 11, and also the first rise in four months. However, manufacturers said pessimism is yet to fully flee as they predict the index will fall over the next three months to plus 9. "Domestic price hikes have weakened consumption and a slowing Chinese economy has caused China-bound materials from the Middle East to make inroads into the Japanese market at low prices," a manager at a chemicals manufacturer wrote in the Reuters poll, conducted July 2-12, on condition of anonymity. "The double punches of weak domestic demand and cheap import materials from overseas are curbing our sales volume." A food processing company manager wrote: "Input prices have risen and remain elevated due to the weak yen as we struggle to transfer costs to our customers." The Reuters Tankan index for the service sector slipped to plus 27 from plus 31, its first fall in three months. Non-manufacturers expect the index to inch up to plus 28 by October. The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading indicates a heftier number of optimists than pessimists. None
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