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The morale of large Japanese manufacturing companies is back to pre-pandemic levels

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Despite the still worrying health situation, the confidence of large Japanese manufacturing companies, which had plummeted last summer because of the pandemic, has returned to its pre-Covid level according to a benchmark barometer published on Thursday. The Tankan survey was carried out among around 9,500 Japanese companies from February 25 to March 31.

The Bank of Japan’s (BoJ) Tankan Confidence Index stood at +5 for large manufacturing companies, down from -10 when the index was last published in December.

Read also: The morale of large Japanese companies continues to rise

This is a stronger rise than expected by the consensus of economists polled by the Bloomberg agency (-1), which signals a return both to the positive and to its fall 2019 level, before the pandemic global.

At the start of summer 2020, the Tankan index had plunged to -34, the lowest since 2009, at the time of the last major global financial crisis.

Human services companies remain the most depressed

The various Tankan quarterly indices (one for each major category of company) measure the difference between the percentage of companies who believe that the economic situation is favorable and those who consider that it is not.

A negative level means that pessimistic opinions prevail and augurs low investment spending, low salaries and few recruitments.

On the side of large non-manufacturing companies (active in services), confidence rose more modestly to -1, against -5 previously. Personal services companies continue to be the most depressed, with the index of confidence in those in the hotel and restaurant industry falling in particular to -81, against -66 in the previous quarter.

Confidence regained

Part of Japan, including Tokyo and its metropolitan area, was placed between early January and late March under a state of emergency, which mainly consisted of asking bars and restaurants to close earlier in the evening.

Read more: Bank of Japan adjusts asset buybacks marginally

All sectors of activity and all sizes of companies combined, the Tankan barometer stood at -8, against -15 previously. The confidence of mid-sized and small businesses also rose, both in industry and in services.

Taken as a whole, “the barometer reinforces our feeling that the economy will recover at a faster rate than many expect,” Capital Economics said in a note.

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