Tag: sentiment

Japan’s service sector sentiment rises to highest in over three decades

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By Leika Kihara

TOKYO (Reuters) -Business sentiment among big Japanese non-manufacturers improved to a more than three-decade high in the first quarter, a closely watched central bank survey showed, offering policymakers hope that domestic demand will underpin a fragile economic recovery.

But big manufacturers’ sentiment soured for the first time in four quarters due in part to auto production disruptions, according to the tankan survey released on Monday.

The outcome is among factors the Bank of Japan (BOJ) will scrutinise in its next meeting on April 25-26, when it issues fresh quarterly growth and inflation forecasts.

The April projections will draw market attention for any clues on how soon the BOJ could raise interest rates again, after having exited its massive stimulus programme last month.

The headline sentiment index for big manufacturers stood at +11 in March from +13 in December, the tankan survey showed, compared with a median market forecast for a +10 reading.

The index gauging big non-manufacturers’ sentiment improved to +34 in March from +32 three months ago, the survey showed, slightly exceeding a market forecast of a reading of +33.

It was the highest reading since August 1991, when Japan’s economy was booming from an asset-inflated bubble, and driven by a surge in inbound tourism and a boost to corporate profits from price hikes, a BOJ official told a briefing.

“The BOJ probably remains confident about service sector sentiment,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“I think the BOJ could raise interest rates one more time this year if wage hikes accelerate.”

Big firms expect to increase capital expenditure by 4.0% in the fiscal year starting in April, against median forecasts of a 9.2% rise, the survey showed.

Both big manufacturers and non-manufacturers expect conditions to worsen three months ahead, the survey showed.

Some companies worried about global economic uncertainty and prospects of rising labour costs due to a tight job market, the BOJ official said.

Japan’s economy expanded an annualised 0.4% in the final quarter of last year, narrowly averting a technical recession as robust capital expenditure offset weaknesses in consumption.

Analysts expect the economy to have barely grown in the first quarter as rising living costs hurt consumption, and output disruptions at some auto factories weighed on industrial production.

Business sentiment and corporate spending appetite are key to whether Japan’s economy can sustain a moderate recovery and allow the central bank to raise interest rates again.

Despite the BOJ’s decision to end negative rates last month, expectations that any further rate hikes by the BOJ will be slow in forthcoming have pressured the yen and briefly pushed it to a 34-year low against the dollar.

(Reporting by Leika Kihara; Editing by Shri Navaratnam)

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S.Korea consumer sentiment drops as food inflation emerges as top election issue

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By Jihoon Lee

SEOUL (Reuters) -South Korea’s consumer sentiment dropped sharply in March on growing worries about higher produce prices, a central bank survey showed on Tuesday, as inflation hitting the dinner table emerges as a major policy issue at next month’s elections.

The consumer sentiment index fell to 100.7 in March from 101.9 in February, posting the biggest monthly drop since October, in the Bank of Korea’s monthly survey of consumers.

Inflation expectations among consumers for the next 12 months rose for the first time in five months, to 3.2% from 3.0%, according to the survey, with two-thirds of the respondents saying produce prices would drive inflation.

That was up from 51.5% in the previous month responding to the same question.

South Korea’s consumer inflation accelerated in February, after three months of easing, due to supply-side pressures, mostly from higher agricultural prices.

Experts have attributed higher prices of agricultural products in part to poor weather but the opposition Democratic Party (DP) has targeted President Yoon Suk Yeol’s government for mismanaging the economy.

“The economy is collapsing and prices are going through the roof,” Democratic Party leader Lee Jae-myung said at a campaign rally in a major produce market on Sunday.

South Koreans go to the polls to elect the 300-member parliament and Yoon’s conservative People Power Party is in an uphill battle to win back a majority now held by the opposition.

Consumer inflation shot to the headlines after Yoon visited a supermarket last week and picked up a bundle of green onions saying “I’d say 875 won ($0.65) is a reasonable price”, seemingly unaware the item was on sale and subject to heavy government subsidy.

Opposition party members and consumer groups criticised Yoon for being out of touch, when the same product is normally sold at more than 4,000 won.

Last week, after Yoon ordered “extraordinary measures” to bring “shopping basket inflation” under control, the government appropriated 150 billion won to inject subsidies and increase supply through direct imports.

It has also announced it would temporarily lower tariffs on imported farm goods.

In recent days, South Koreans were seen rushing to major grocery stores and lining up to buy apples and green onions supplied at cheaper prices on government subsidies, local media reported.

($1 = 1,337.3800 won)

(Reporting by Jihoon Lee, Editing Michael Perry and Jack Kim)

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