Japanese businesses forecast gloomy outlook as sales tax rises to 8%


The Bank of Japan's Tankan survey of large-manufacturing sentiment increased for the fifth consecutive time, edging up to a seven-year high of 17 in Q1 from 16 in Q4 but slightly missing consensus of 18.

The non-manufacturing index rose to 24 from 20, as expected.

However, with sales tax increasing to 8% today from 5%, the manufacturing outlook print slumped to 8 from 14 and the non-manufacturing outlook dropped to 13 from 17. Both figures were worse than expected.

In addition, big companies expect to increase capital spending by just 0.1% this fiscal year, which starts today, way below a previous reading of 3.9%.

"There isn't much reason for companies to be optimistic," says economist Shinichiro Kobayashi. "The sales-tax hike is going to drag on the economy, and exports have been weaker than expected on the back of a slow global recovery." (PR)

Meanwhile, Japanese shoppers went on a spending binge to stock up ahead of the tax hike.

The Nikkei closed -0.2%, while the USD-JPY is +0.1% at ¥103.29.

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