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Japan to release Q4 business confidence index

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Japan to release Q4 business confidence index

Japan business confidence
Photo: Yoshikazu Tsuno/ AFP

The Bank of Japan’s fourth quarter (Q4) Tankan index for big manufacturers’ sentiment will be released today.

The Tankan index ranges from -100, being most pessimistic, to 100, most optimistic, and represents a cross-industry business stakeholder evaluation of the business environment. Since Q1 2020, Japan’s Tankan index has run negative, with the actual index even lower than the consensus index, indicating a strong pessimistic outlook. Leading into 2020, Japan’s Tankan index had been steadily declining, dropping from 26 in Q4 2017 to 7 in Q2 2019. This represented a steady decline in business confidence even before the COVID-19 crisis.

The pandemic has exacerbated the declining trend and in 2020 Q2 Japanese business sentiment tanked to an 11-year low amid a slump in global demand. If today’s figure is less negative than the consensus, while negative, it may indicate the beginning of a Japanese business recovery from the increasingly negative pre-COVID-19 trend. A third-wave of COVID-19 infections may stall this recovery. A recent surge in cases has forced the government to balance economic stimulus and virus containment policies. If today’s number is more negative than the consensus, Japan’s business recovery may be on hold until a COVID-19 vaccine is readily available to the public.

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