Confidence among Japanese manufacturers receded in May for the first time in nine months after hitting a decade-high level in April, a Reuters survey has found, showing guarded optimism in a nascent export-led economic recovery.
The monthly poll—which tracks the Bank of Japan’s key quarterly tankan—showed confidence at service-sector firms hit a four-month high, a tentative sign of a pickup in domestic demand.
The Reuters Tankan follows data last week that showed the economy expanded for a fifth straight quarter at the start of this year led by exports and private consumption, although sluggish wage growth weighed on households.
In the poll of 527 large and midsized firms, conducted between May 9-19 in which 243 responded, the sentiment index for manufacturers fell two points to 24 in May, dragged down by the food processing, precision machinery and chemicals industries.
This followed a score of 26 in April, which was the highest reading since August 2007, a year before the collapse of a US investment bank Lehman Brothers triggered the global financial crisis.
“Sentiment remained firm in both manufacturing and non-manufacturing. The dollar has risen since bottoming in mid-April and such a recovery in market conditions should underpin business sentiment,” Yuichiro Nagai, economist at Barclays Securities Japan, noted in a report.
“Although indicators such as the Chinese PMI are showing weakness, machine tool orders and other data look firm, suggesting any risk of a collapse in sentiment will be limited by overseas factors.”
The Reuters Tankan’s service-sector sentiment index was up two points to 30 in May, the best reading since the beginning of this year, led by retailers.
The sentiment index was seen unchanged at 24 for manufacturers in August, while the index was expected to fall to 22 for non-manufacturers.
Gov’t Retains Its Views
Japan’s government has kept unchanged for May its overall assessment of the economy—that it is recovering gradually, though pockets of weakness remain.
On all topics evaluated, which include household spending, capital expenditure and exports, the government repeated the views it expressed for April.
“The economy is in moderate recovery, but delays in improvement can be seen in some parts,” the cabinet office said in its monthly economic report on Wednesday, using the same expression for the sixth consecutive month.
Japan’s economy has shown signs of life in recent months, with exports and factory output benefiting from a recovery in global demand. Business sentiment is improving, consumer spending is continuing to recover on the whole, capital expenditure is showing signs of picking up and exports are recovering, the Cabinet Office said in its report.
The economy is expected to recover gradually as employment and wages continue to improve, but uncertainty in overseas economies and fluctuations in financial markets warrant attention, the report also said.
Internet of Things
A hundred Japanese companies are working to launch an exchange for data collected through the “internet of things” as early as 2020, which could let companies better trade information that could inspire new products and services, Nikkei reported.
There are high hopes around the world for IoT, which connects appliances, cars and even factory equipment through the internet. Many are looking to use data collected from these devices to develop new products and services, as well as to power technology like self-driving cars.
More than 50 billion devices are expected to be connected to the internet in 2020. Japan accounts for roughly 40% of the global market for sensors, which is a central component of IoT technology. Japan hopes also to play a leading role in the market for data generated by interconnected devices.
While American giants like Google dominate in providing data-based services to retail customers, no efforts have yet been made in Europe or the US to create a larger market that connects multiple exchanges for IoT-related data.
Because no one company can effectively collect IoT-generated data on its own, more are looking to purchase additional information from the outside. This could lead to a flood of competing exchanges on the market, which some believe will make it more difficult for companies to find the data they need.
