November 7, 2018 / 11:11 PM / 10 days ago

Japan manufacturers' mood sours amid trade war fears: Reuters Tankan

TOKYO (Reuters) - Japanese manufacturers’ business confidence worsened in November and was expected to deteriorate further, the Reuters Tankan poll showed, reflecting apprehension over the risks of a full-blown trade war between the United States and China.

FILE PHOTO - A man works at a factory that manufactures iron pipe fittings in the Keihin industrial zone in Kawasaki, south of Tokyo, Japan, April 16, 2013. REUTERS/Toru Hanai/File Photo

The monthly poll, which tracks the Bank of Japan’s (BOJ) closely watched tankan quarterly survey, found the mood among manufacturers’ was expected to deteriorate further during the coming three months, though the mood in the service sector rebounded from a near two-year low.

The sentiment index for manufacturers stood at 26, down two points from the previous month, dragged lower by precision machinery and chemicals makers, according to the survey conducted Oct. 24 to Nov. 5.

The index was seen falling further to 24 in February.

In the poll of 482 large- and mid-sized companies, firms voiced concerns over trade war risks and geopolitical tensions that have boosted prices for oil and raw materials.

“The business situation is not so good due to the U.S.-China trade friction and the rising trend in fuel prices caused by the strains in the Middle East,” a manager of a chemicals maker wrote in the survey.

“Capital expenditure is being delayed due to uncertainty surrounding the global economy due to trade tensions,” wrote a manager at a machinery maker.

Beijing and Washington have imposed tit-for-tat duties on each other’s goods over recent months, with neither side backing down from a increasingly bitter trade dispute that has jolted financial markets and cast a pall over the global economy.

The Reuters Tankan service-sector index rebounded to 30 in November, led by retailers and transport and utility firms, having struck a near-two-year low of 24 in the previous month due to natural disasters.

The index was expected to rise further to 32 in February.

The BOJ’s last tankan showed sentiment at big manufacturers soured in the September quarter, hitting its lowest level in nearly a year, as firms faced rising raw material costs and a string of natural disasters that disrupted production.

Japan’s economy grew an annualized 3.0 percent in April-June, led by solid household and business spending, but a recent run of weak data reinforced suspicions that the economy may have suffered a temporary contraction in the third quarter.

The central bank last week kept its policy settings unchanged, as widely expected, and cut its inflation forecasts.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists.

Reporting by Tetsushi Kajimoto; Editing by Simon Cameron-Moore

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