TOKYO - Business confidence among major Japanese manufacturers in June improved to the highest level in eight years, as robust demand related to chips and artificial intelligence offset risks posed by the Middle East conflict, the Bank of Japan's Tankan survey showed Wednesday.
The sentiment index measuring confidence among companies such as those in the auto and electronics sectors rose to 22 from 17 in March for the fifth straight quarterly increase, beating the average market forecast of 16 in a Kyodo News tally.
But the index is projected to decline to 17 in September. The BOJ survey of 9,141 companies conducted between May 28 and Tuesday, received responses from around 70 percent of the firms by June 11, before the preliminary agreement between the United States and Iran to end their war.
It will "take time" for businesses to adjust their plans even though a deal has been reached, a BOJ official said at a briefing.
A wide range of industries remain concerned over the negative impact of the war, which sent crude oil prices sharply higher and disrupted energy supplies, the BOJ official said. The United States and Israel launched the war on Feb. 28.
Businesses in general-purpose, production, business-oriented and electrical machinery sectors as well as those in nonferrous metals, iron and steel, chemicals and textiles said they have seen strong orders for chip-making devices and related materials, the official said.
More companies are passing on increased material costs to retail prices to prevent profits from being squeezed, while some sectors benefited from orders that were brought forward to secure supplies, the official said.
Some companies voiced concerns that the Middle East situation may leave procurement disrupted, which could lead to further rises in materials costs and reduction in capital spending, he said.
Sentiment among chemical makers improved to 20 from 14, while confidence among manufacturers of production machinery rose by 10 points to 36. The petroleum and coal products sector saw a deterioration to 9 from 18 and motor vehicles also shed 1 point to 12.
The index for large nonmanufacturers, including the service sector, stood at 37, up from 36 in the previous survey in March, marking the first improvement in five quarters.
The accommodation, eating and drinking services sector benefitted from growth in inbound visitors, with sentiment rising to 46 from 34.
Construction and real estate sectors weakened due to a rise in material costs stemming from the Middle East situation, the official said.
All enterprises polled, also including medium-sized and small enterprises, raised their inflation outlooks by 0.1 percentage point for one, three and five years ahead, to 2.7, 2.6 and 2.6 percent, respectively, the data showed.
The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.
