Japanese companies’ concerns about the domestic economy remaining stagnant — which were prevalent until mid-2016 — appear to be fading, according to the latest Bank of Japan (BOJ) March 2017 Tankan survey. This change in sentiment seems to have stemmed from factors such as the recovery in the global economy as well as a depreciation of the yen.
However, at the same time, the survey also found that Japanese businesses are not overly optimistic about the future — owing to factors including uncertainties surrounding the Trump administration’s policy management, as well as a labor shortage in Japan.
With regard to the situation in the U.S., there have been some benefits to Japanese exporters since Donald Trump won the presidential election in November 2016 — owing to the yen’s depreciation. However, looking ahead, Japanese businesses are aware that the U.S. may impose protectionist trade barriers against its trading partners.
Furthermore, there are also concerns about the political situation in Europe — specifically on issues such as the forthcoming French presidential election. The above factors explain why on the one hand, companies sense an element of recovery, but on the other, they are cautious about the future. This has been reflected by the worsening in the diffusion index among respondents’ in this latest Tankan survey.