Japanese Manufacturers’ Sentiment Turns Pessimistic Due To Strong Yen & Europe’s Debt Crisis

Manufacturing industries are the prime movers in Japan’s economic growth.

However, Japanese manufacturers’ are pessimistic this time due to a strong yen and Europe’s debt crisis, according to the latest Tankan survey.

In its quarterly survey, the Bank of Japan said large manufacturers’ sentiment in the three months to December dropped to minus four from plus two three months ago.

“Companies are taking more cautious views of the economy due to the one-two punch of the slowdown in overseas economies and the firmer yen,” said Yoshikiyo Shimamine from Dai-Ichi Life Research Institute in Tokyo.

Analysts said sentiment could worsen if Europe’s debt crisis continues.

Japan’s economy has rebounded from a recession triggered by the 11 March earthquake and tsunami, but as the initial boost from companies restoring supply chains and production facilities subsides, exports and factory output could slow again.

Adding to the problems was the effects of the floods in Thailand, which further disrupted supply chains. Sentiment was also hit by the decreasing demand from Europe as growth slowed.

Another effect of the uncertainty in Europe and the US has been that global investors have turned to the Japanese currency as a safe haven, which has pushed up the strength of the yen.

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