In a recent survey conducted by Japan’s central bank, it was found that business sentiment among major Japanese manufacturers has decreased for the first time in a year, largely due to concerns about the tariffs imposed by U.S. President Donald Trump. The survey, known as the Bank of Japan’s “tankan” quarterly survey, revealed that the index for large manufacturers indicating the percentage of companies expecting favorable conditions compared to those anticipating negative outcomes dropped from plus 14 to plus 12 in December, marking the first decline in four quarters.
Key sectors such as automotive and electronics, which heavily rely on exports to the U.S., are major contributors to Japan's economy. In addition to trade issues, Japan is also facing challenges like a declining population hindering economic growth. On the positive side, rising wages and a thriving tourism industry have provided some support.
The looming threat of U.S. auto tariffs is causing anxiety for major manufacturers like Toyota Motor Corp. and Nissan Motor Corp. Prime Minister Shigeru Ishiba expressed efforts to negotiate with the U.S. to exclude Japan from these tariffs, even offering to personally meet with Trump if needed.
The U.S. is set to implement 25% tariffs on auto imports starting Thursday, with additional tariffs on fully-imported cars and applicable auto parts following in the subsequent weeks until May 3. Japanese automakers also have production facilities in Mexico, which has already been hit by U.S. import tariffs.
The Bank of Japan is scheduled to hold a monetary policy meeting on April 1 to discuss potential interest rate adjustments, with the tankan survey results playing a crucial role in informing this decision. Japan's export-driven economy is facing challenges due to a global slowdown in demand and escalating material costs, exacerbated by the weakening yen against the U.S. dollar.
In contrast, the tankan survey indicated an improvement in sentiment among large nonmanufacturers, rising from plus 33 to plus 35, driven by robust tourist activity. Additionally, the Japanese government reported a slight decline in the nation's unemployment rate to 2.4% compared to the previous month.