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Japanese factory vibe in July hits highest since late 2018News

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TOKYO (Reuters) – Japanese manufacturers’ confidence in business rose in July to a high for more than two and a half years as the country’s export-led recovery remained intact thanks to strong global demand, showed the Reuters Tankan poll.

FILE PHOTO: Women assemble an Aquos television at Sharp Corp’s Tochigi factory in Yaita, north Tokyo, November 19, 2015. REUTERS / Reiji Murai

But in a worrying sign, sentiment in the service sector turned pessimistic, as businesses battled the fallout from the coronavirus crisis, the poll found, which tracks the Bank of Japan’s (BOJ) quarterly Tankan survey closely. monitored.

“The global economy is showing signs of recovery from the impact of the coronavirus pandemic,” an official at a machinery manufacturer wrote in the poll.

“But the outlook remains uncertain as our clients postpone their business spending decisions as their budgets are on a downward trend.”

The Reuters Tankan Confidence Index for Manufacturers rose from 22 to 25 in June, its highest since November 2018, according to the poll conducted from June 30 to July 9. The service index fell to minus 3 from a flat reading the previous month. (For a detailed table of results, click)

Reuters Tankan Index readings are calculated by subtracting the percentage of respondents who say conditions are bad from those who say they are good. A positive reading means optimists outnumber pessimists.

Manufacturer sentiment was boosted by strong confidence in manufacturers of automotive, chemical and metal products, which offset negative conditions in the textiles and paper sector.

The poll, which questioned 503 large and medium-sized companies, of which 257 companies responded on condition of anonymity, precedes the BOJ’s political meeting on July 15 and 16.

The BOJ’s “tankan” business survey released this month also showed that business confidence improved to a two-and-a-half-year high, while sentiment in the service sector turned positive. for the first time in five quarters.

The BOJ is expected to lower this year’s economic growth forecast in new quarterly projections as a new state of emergency for Tokyo, which will continue through August 22, threatens to hurt consumer and business confidence.

The Reuters Tankan poll highlighted the pain companies, especially those in the service sector, are feeling over the health crisis.

“Overall consumer behavior is slow as sentiment is not improving due to the anti-coronavirus measures,” an official for a food producer wrote in the investigation.

But even as they feel the effects of the extended restrictions, the Japanese government this month estimated that it expects the economy to return to pre-pandemic levels by the end of this year. , in large part due to strong exports and increased consumer spending as a result of the progress. in vaccines.

Business confidence of manufacturers improved further to 28 in October, while that of businesses in the service sector is expected to reach 8, a slightly lower three-month forecast compared to the previous month, according to the survey.

Reporting by Daniel Leussink; Editing by Simon Cameron-Moore