Japan’s Business Mood Hits 2-Year Low amid Slowing Global Demand and High Material Costs

Japan’s business sentiment for the first three months this year hit the lowest level in more than two years as slowing global growth weighs on the economic outlook.

The headline index which measures big manufacturers’ sentiment fell to +1 in March from +7 in December, according to the data reported by the Bank of Japan. The reading was lower than the median of +3 while posting its fifth straight quarter of deterioration and the worst sentiment since December 2020.

The mood within the manufacturing sector got soured as of late as producers in the export-reliant country complained of difficulties amid rising raw material and fuel costs, coupled with slowing overseas growth and chip demand.

Big firms in Japan expect inflation at 2.8% a year from now, 2.3% three years from now and 2.1% five years from now, according to the survey. This shows that Japanese companies expect inflation to remain above the Bank of Japan’s target of 2% for at least five years.