A survey carried out
by Shoko Chukin Bank of over a thousand companies has revealed that sentiment
has deteriorated for the third month in a row for mid and smaller sized
Japanese companies.
The study seems to
confirm the view that only the financial giants have benefitted from the
nation’s recent economic development.
Another prominent report by Bank of Japan,
the tankan business sentiment survey which is delivered quarterly, will be
released next week and will be closely observed by the financial community.
Any interest rate hike by the BOJ will be
dependent on these important sentiment studies and traders will be looking on
anxiously for signs as to when the hike is likely to occur. At the moment the
general opinion is that it will come in August.
The key threshold for the diffusion index
that the Shoko Chukin Bank carried out to measure
business sentiment is 50 percent. The result of the index was below that for
the third straight month, coming in at 48.3 and is nearly 1 percent down on
May.
The forecast for next
month is still under the threshold figure, indicating negative overall business
conditions. Any figure over 50 would be positive.
In the area of
manufacturing, the DI figure increased slightly by 0.4 percent but still
remained under the 50 mark. Non-manufacturing didn’t fare any better, falling
under 50 for the first time in 90 days.
Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management commented on the study, “There seems to be
some disparity between the smaller and larger firms in the country. A lot of
the smaller businesses are subcontractors for the giants, so the business
conditions are going to diverge quite a bit.”
Poulsen added, “The growth that we’ve seen
in retail is going to slim down a little in the coming months, raw material
costs are getting higher as well which means the mid to small firms are really
going to struggle.”
As expected, a Reuters survey of 30
economists released last Thursday revealed that the bigger companies will be
unperturbed by the BOJ tankan business conditions, while amongst smaller
companies sentiment is almost certain to be worse than the same report in the
first quarter.
