Stronger Yen and Uncertainty over the Global Economy

「中東情勢の再緊迫化を背景として、原油・石油製品などの価格が高止まりしているものの、企業による価格転嫁の進展や世界的なAI関連需要の拡大が追い風となったことで、大企業製造業の景況感は改善傾向で推移しました。」

「Meanwhile, looking ahead, expectations for AI-related demand are supporting business sentiment, but concerns about the situation in the Middle East, for which there is still no prospect of an end, remain strong, and conditions continue to be uncertain.」

「依然として収束の兆しが見えないウクライナ情勢や混迷を極める中東情勢など、景気の下押し要因となる地政学的リスクは根強く残っており、先行きは不透明な状況が続いております。」

「During the fiscal year, Japan's economy remained on a moderate recovery trend against a backdrop of improved employment and income conditions. However, the year was characterised by continued uncertainty over the outlook, reflecting caution about downside risks to the economy, including the US policy of raising tariffs, deteriorating Japan-China relations, and heightened geopolitical risks centred on the Middle East, including the increasingly tense situation involving Iran.」

「During the interim accounting period, business sentiment among large manufacturers improved slightly. This is believed to reflect reduced uncertainty over the outlook following the formal implementation of the Japan-US tariff agreement and continued solid domestic demand for capital investment. On the other hand, business sentiment in the outlook showed signs of deterioration, and caution over downside risks remained, including the effects of additional tariffs becoming apparent and the potential resurgence of US-China trade friction.」

「However, concerns about downside risks to the economy remain difficult to dispel due to heightened geopolitical risks, including the situations in Ukraine and the Middle East, the US policy of raising tariffs, and the resurgence of US-China trade friction, and the outlook remains uncertain.」

「During the interim accounting period, Japan's economy saw price pass-through and a recovery in global semiconductor demand provide support for large manufacturers. However, sluggish exports due to the slowdown in the Chinese economy and factory shutdowns caused by Typhoon No. 10 weighed on business sentiment, and overall business sentiment showed no change.」

「During the fiscal year, economic activity normalised as COVID-19 subsided and the economy showed signs of recovery. However, the outlook remained uncertain due to factors including higher raw material and energy prices resulting from the situation in Ukraine and the Middle East, rapid yen depreciation, and the impact of production and shipment stoppages at certain automakers.」

「Meanwhile, the outlook for business conditions has deteriorated in both the manufacturing and non-manufacturing sectors, indicating a cautious stance toward downside risks in Japan and overseas, including a slowdown in the US economy and a worsening labor shortage.」

「During the 3-month period ended June 2023, business sentiment improved broadly, with manufacturing recovering for the first time in some time following the easing of supply constraints in the automotive sector and a lull in raw material price increases, while non-manufacturing also continued to improve due to the post-COVID recovery and a recovery in inbound demand. On the other hand, ordinary profit plans across all company sizes and industries indicated a 5.8% decline year on year, apparently reflecting caution over downside risks such as a slowdown in overseas economies, including Europe and the US, and renewed increases in fuel and raw material prices.」

「During the fiscal year, Japan's economy showed signs of recovery as COVID-19-related restrictions were gradually eased, but manufacturing continued to face headwinds, including surging fuel and raw material prices due to the depreciation of the yen against the US dollar and the prolonged uncertainty surrounding the situation in Ukraine. In addition, downside risks remained, including concerns over the financial systems in Europe and the US triggered by the failure of a US bank, and the outlook for the economy remained uncertain.」

「During the 9-month period ended December 2022, business sentiment among large manufacturers weakened due to headwinds including surging fuel and raw material prices, the deterioration of the semiconductor market, and sluggish overseas demand accompanying the delayed recovery of the Chinese economy. Meanwhile, sentiment among non-manufacturers improved as the reopening of economic activity continued, and overall business sentiment recently improved. On the other hand, numerous downside risks remained, including concerns over a slowdown in the global economy, the renewed spread of COVID-19, and a decline in domestic consumption due to rising prices, and the overall outlook for business sentiment deteriorated.」

「However, downside risks surrounding the domestic and overseas economies remain, including persistently high raw material and energy prices and a recession in Europe and the US due to interest rate hikes, and uncertainty over the outlook continues.」

「Capital investment plans for fiscal 2022 were revised sharply upward to a 14.1% increase year on year. Although June surveys are typically revised upward, the exceptionally high growth rate this year is believed to reflect strong expectations for the recovery in earnings to date, the reopening of economic activity, and the easing of supply constraints. On the other hand, ordinary profit plans were set at a 3.6% decline year on year, apparently reflecting a cautious stance that took into account downside risks, including the renewed spread of COVID-19, the prolonged situation in Ukraine, and global inflation.」

「During the fiscal year, the business environment became increasingly turbulent due to factors including the situation in Ukraine, which may remain prolonged, and COVID-19, with infections remaining elevated. The environment surrounding companies is expected to remain difficult.」

「During the cumulative third quarter, Japan's economy showed signs of recovery as economic activity resumed following the lifting of the state of emergency and priority preventive measures related to the spread of COVID-19. However, the outlook remained uncertain due to downside factors, including the rapid spread of the Omicron variant, a new COVID-19 variant, and rising raw-material prices.」

「Regarding the outlook, the fourth state of emergency declaration had a certain effect on the spread of COVID-19 in Japan, but new risk factors had also emerged, including shortages of parts supplied from Southeast Asia and power shortages in China, and the situation remained uncertain.」

「During the 3-month period ended June 2021, signs of improvement emerged, particularly in manufacturing, supported by increased overseas demand. Although progress in COVID-19 vaccinations was anticipated to support the outlook, Japan remained in an uncertain situation as declarations of a state of emergency and priority preventive measures were issued amid a renewed spread of infections and an increase in cases of variant strains.」

「According to the Bank of Japan Tankan (March 2021 survey), the ordinary profit plan for fiscal 2020 was revised upward from a 35.3% decline year on year in the December survey to a 30.3% decline, but was expected to end at a very low level compared with typical years. The capital investment plan, meanwhile, was revised further downward, from a 3.9% decline year on year in the December survey to a 5.5% decline.」

「During the 9-month period ended December 2020, Japan's economy showed a temporary improvement in the downturn associated with COVID-19, supported by the government's various demand-stimulus measures and a recovery in the domestic and overseas economies. However, the renewed spread of infections in Japan from December resulted in continued caution about the outlook. According to the Bank of Japan's Tankan survey conducted in December 2020, ordinary profit plans for fiscal 2020 across all company sizes and industries were revised further downward from the September survey, from a 28.5% decline to a 35.3% decline year on year, as the end of the COVID-19 pandemic remained unforeseeable. Capital investment plans were also revised further downward from the September survey, from a 2.7% decline to a 3.9% decline year on year.」

「During the 6-month period ended September 2020, COVID-19 had still not been brought under control after the lifting of the state of emergency, and views of the outlook remained cautious.」

「During the 3-month period ended June 2020, business sentiment in Japan deteriorated sharply due to the spread of COVID-19. According to the Bank of Japan's Tankan survey conducted in June 2020, capital investment plans for fiscal 2020 across all company sizes and industries were revised downward from the March survey, from a 0.4% decline to a 0.8% decline year on year. This was an exceptional result for a June survey, which had typically resulted in upward revisions. Ordinary profit plans across all company sizes and industries were also revised sharply downward from the March survey, from a 2.5% decline to a 19.8% decline year on year.」

「During the fiscal year, business sentiment in Japan deteriorated sharply due to the intensification of US-China trade friction, the slowdown in overseas economies, and the global spread of COVID-19.」

「During the 9-month period ended December 2019, business sentiment deteriorated due to sluggish exports resulting from the slowdown in overseas economies and the decline following the pullback in front-loaded demand before the consumption tax increase. According to the Bank of Japan's Tankan survey conducted in December 2019, capital investment plans for fiscal 2019 across all company sizes and industries were revised upward to a 3.3% increase year on year, although the revision was modest compared with typical years. Ordinary profit plans were revised downward by 0.9% from the September survey to a 7.5% decline year on year, reflecting the deterioration in the overseas environment described above. However, following the recently concluded Phase One US-China trade agreement, the outlook may outperform expectations.」

「During the 6-month period ended September 2019, Japan's economy showed signs of deterioration due to increasingly severe US-China trade friction and the slowdown in overseas economies. Meanwhile, ordinary profit plans across all company sizes and industries were revised downward by 2.5% from the June survey to a 6.7% decline year on year. In addition to the overseas concerns described above, risks remained both domestically and internationally, including concerns that household consumption would weaken following the consumption tax increase and the effects of Typhoon No. 19.」

「During the 3-month period ended June 2019, Japan's economy remained stagnant despite improved domestic demand from the change of era and a long holiday period, as external demand deteriorated due to the intensification of US-China trade friction and the slowdown in the Chinese economy. Ordinary profit plans across all company sizes and industries were revised downward by 1.8% from the March survey to a 4.3% decline year on year, and the outlook deteriorated against a backdrop of the overseas concerns described above, stagnant IT demand, and increasingly severe labour shortages.」

「According to the Bank of Japan's Tankan survey conducted in March 2019, capital investment plans for fiscal 2018 across all company sizes and industries remained at a high level, unchanged from the December survey at a 10.4% increase year on year. Meanwhile, ordinary profit plans across all company sizes and industries were revised downward by 0.7% from the December survey to a 1.5% decline year on year. With the global economy uncertain, concerns that the slowdown in the Chinese economy and IT demand would continue in the near term, together with increasingly severe labour shortages, caused the outlook to deteriorate.」

「During the 9-month period ended December 2018, Japan's economy remained on a moderate recovery trend as the effects of natural disasters subsided. According to the Bank of Japan's Tankan survey conducted in December 2018, capital investment plans for fiscal 2018 across all company sizes and industries were revised upward from the September survey to a 10.4% increase year on year and remained at a historically high level, confirming strong corporate appetite for capital investment. On the other hand, concerns about the overseas economy, including US-China trade friction, remained, leaving the outlook uncertain.」

「According to the Bank of Japan's Tankan survey conducted in September 2018, ordinary profit plans for fiscal 2018 across all company sizes and industries remained 3.6% below the previous fiscal year, with only a modest upward revision of 1.6% from the previous survey. This is believed to reflect the fact that the assumed exchange rate was left unchanged from the June survey despite a solid overseas economy. Capital investment plans, however, remained almost unchanged from the June survey at an 8.5% increase year on year, a high growth rate by historical standards, indicating that companies' investment appetite remained strong.」

「According to the Bank of Japan's Tankan survey conducted in June 2018, ordinary profit plans for fiscal 2018 across all company sizes and industries were revised downward by 3.6% from the March survey to a 5.1% decline year on year. The decline is attributed to higher costs associated with rising crude oil prices and personnel expenses, as well as a revision of the assumed exchange rate toward a stronger yen, which put downward pressure on earnings plans. However, capital investment plans were revised upward by 9.0% from the March survey to a 7.9% increase year on year. With ample cash flow, the results indicate strong corporate investment appetite, particularly for rationalisation and labour-saving investment against a backdrop of labour shortages.」

「According to the Bank of Japan's Tankan survey conducted in March 2018, ordinary profit plans for fiscal 2017 across all company sizes and industries were revised upward by 2.6% from the December survey to a 7.1% increase year on year. However, capital investment plans were revised downward by 0.4% from the December survey to a 4.0% increase year on year, resulting in a plan lacking strength.」

「With corporate earnings strong, the Bank of Japan's Tankan survey showed that capital investment plans for fiscal 2017 across all company sizes and industries were revised upward to a 6.3% increase year on year from the previous fiscal year. However, plans for large manufacturers were revised downward, resulting in a plan lacking strength.」

「During the 6-month period ended September 2017, Japan's economy was recovering moderately. Corporate earnings were strong, and profit plans in the Bank of Japan's Tankan survey were being revised upward as the yen remained weaker than companies' assumed exchange rates. With corporate earnings strong, capital investment plans for fiscal 2017 across all company sizes and industries were revised upward from the June survey to a 4.6% increase year on year. Companies had ample cash on hand and were expected to invest in renewing and maintaining equipment, research and development, and efficiency and labour-saving measures in response to increasingly severe labour shortages.」

「During the 3-month period ended June 2017, Japan's economy saw strong corporate earnings, with ordinary profit remaining at a record-high level. With corporate earnings strong, capital investment plans for fiscal 2017 across all company sizes and industries increased 2.9% year on year, showing a stronger increase than in typical years and indicating strong corporate appetite for capital investment.」

「During the fiscal year, Japan's economy remained on a moderate recovery trend amid favourable corporate earnings, but the outlook remained uncertain as overseas developments, including the protectionist policies of the Trump administration in the US and the political situation in Europe, continued to lack clarity.」

「During the 9-month period ended December 2016, Japan's economy improved in terms of business sentiment following the weaker yen and higher share prices after the US presidential election. Corporate sales bottomed out, supported by a recovery in exports and an increase in residential investment, while ordinary profit remained at a high level due to restrained growth in personnel expenses and lower variable costs resulting from lower raw material prices. Against a backdrop of strong corporate earnings, capital investment plans for fiscal 2016 increased year on year across all company sizes and industries, although they remained somewhat cautious due to uncertainty in the domestic and overseas economies.」

「Although sluggish domestic and overseas demand and the stronger yen have continued to make it difficult for sales to grow, ordinary profit has recently increased, supported by restrained growth in personnel expenses and lower variable costs, including lower imported raw material prices resulting from the stronger yen. Against a backdrop of solid corporate earnings, capital investment plans for fiscal 2016 increased year on year across all company sizes and industries, although manufacturers were somewhat cautious due to the stronger yen and other factors.」

「The victory of the pro-Brexit camp in the UK's referendum in June this year led to a rapid appreciation of the yen and decline in share prices, while uncertainty over the outlook for the global economy also increased.」