Japanese survey of “tankans” shows manufacturers optimistic about outlook

The business climate among Japanese manufacturers has reached its highest level in nearly three years, according to a quarterly central bank survey.

The results of the Bank of Japan’s “tankan” survey, released on Friday, revealed sentiment among major manufacturers rose from 14 to 18, the highest level since late 2018.

The reading for non-manufacturers increased only slightly from 1 to 2.

The tankan measures business sentiment by subtracting the number of businesses reporting negative business conditions from those reporting positive.

The report comes as Japan on Friday ended a state of emergency in many areas, including Tokyo, after new coronavirus infections began to decline.

The world’s third-largest economy was in the doldrums even before the pandemic struck in waves that crippled business activity.

The survey found that shortages of components such as computer chips are holding back the recovery.

Manufacturers are reducing their inventories and, in some cases, suspending production at some factories in response.

“Such low inventory levels were last seen during the bubble of the 1980s. Among wholesalers, inventory levels fell to an all-time low,” Capital Economics’ Marcel Thieliant said in a report.

He noted that the production capacity dropped slightly in the last survey, with room for improvement.

A positive result of the deficits is that some manufacturers are investing in factory equipment: the large manufacturers forecast a 10% increase in capital spending, which was the strongest outlook since the same quarter in 2018.

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