Weak auto sales dampen the sentiment of big manufacturers in Japan: survey

The latest showing was still among the strongest in two years.

Big manufacturers in Japan grew less optimistic about the business environment in the first quarter as automakers registered weak sales, according to the Bank of Japan’s tankan survey.

Results of the quarterly survey showed the headline large manufacturing firm index rose to +11 in the three months ended March, easing from +13 in the fourth quarter but still exceeding the forecast (+10) by a tad.

Still, last quarter’s reading remained one of the strongest showing over the past two years or since the first quarter of 2022 when it hit +14.

Big manufacturers were the least optimistic about the auto industry last quarter with the reading for motor vehicles recording the biggest drop in sentiment in the first quarter, falling by 15 points to +13.

“This was due to a significant downturn in production and sales volume for motor vehicles due to the halt of operations at some motor vehicle factories,” Shotaro Kugo, senior economist at the Daiwa Institute of Research, said in a separate commentary.

Major companies’ sentiment on petroleum and coal products, as well as shipbuilding improved the most among all the industries tracked in the survey.

Meanwhile, business sentiment among smaller manufacturers ended mixed in the first quarter. The survey showed business confidence among medium-sized enterprises remained unchanged at +6, while sentiment of small factories turned sour with a -1 reading last quarter, down from +2 previously.

A reading above 0 indicates improving sentiment while levels below that signal worsening conditions.