Strong reliance on exports also becoming a problem for Japan

Sentiment in corporate Japan suffered heavily in the first three months of this year. The quarterly survey index compiled by the Bank of Japan (the Tankan Index) most recently sagged across the board. Among the major industrial companies that rely on exporting, the assessment of the current situation fell from 19 to a mere 12 points. This was weaker than generally expected and the lowest level in two years. Where the major service providers are concerned, the index dropped from 24 to 21 points. In terms of all companies (all sectors and size categories) the Tankan slid from 16 to 12 points.

Several factors probably triggered the slump in sentiment:

Firstly, the trade dispute between the USA and China has also clearly marred conditions for Japanese exports. Japan supplies many semi-finished products to China’s export industry and is thus exposed to the latter’s losses in business with the US.

Secondly, and irrespective of the trade conflicts, the global economy has now entered a period of weaker growth and this hits the export-intensive Japanese economy hard.

Thirdly, in Japan itself economic conditions are not rosy at present and the economy is manifestly faltering.

On balance, the global economic slowdown is thus also reflected in the Japanese economy, and this serves to intensify its malaise at home.

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