TOKYO : Japanese manufacturers' business confidence improved for a second month in April as material industries remained resilient in the face of the Ukraine crisis, although production cuts dampened automakers' optimism, the Reuters Tankan poll showed.
The service sector index rebounded strongly to a three-month high after COVID-19 curbs were eased late last month, although managers in the poll expected a slower recovery ahead, citing inflationary pressures.
While the readings were up from the month before, Japanese firms remained wary of fresh risks to their recovery plans, according to the March 30 - April 8 poll, which tracks the Bank of Japan's (BOJ) closely watched "tankan" quarterly survey.
"In addition to the coronavirus, the trends in foreign exchange and raw material prices following the Ukraine crisis have clouded our outlook," said a chemical company manager in the poll of 499 big and mid-sized companies, of which 246 responded.
The Reuters Tankan manufacturers' sentiment index advanced to plus 11 in April from plus 8 in the previous month. The service-sector index rose for the first time in three months to plus 8, from the prior month's minus 1.
(For a detailed table of the results, click)
Both the manufacturing and service-sector sentiment indexes in the Reuters poll were slightly below the latest results of the BOJ's own tankan survey released on April 1.
In the Reuters poll, sub-indexes for manufacturers closer to raw materials such as oil refinery/ceramics, textiles/paper and steel/nonferrous metals posted double-digit increases, with some citing robust global chip demand as a tailwind.
"Strong semiconductor-related business is leading our company-wide performance," said a ceramics company manager.
By contrast, the sub-index for autos/transport equipment makers dropped from minus 14 to minus 36 in April, the lowest since September 2020. Readings for electric machinery and chemicals also marked double-digit declines.
In March, Japan's biggest carmakers including Toyota Motor Corp announced production cuts at domestic plants due to parts shortages and irregular disruptions such as a cyberattack and an earthquake.
Auto industry managers in the poll expressed concerns over production cuts as well as a wide variety of newly emerging risks.
"Orders remain low due to the Ukraine situation, a weak yen and COVID-19, while raw material and shipping costs are rising," said a manager at a transport equipment maker.
Among non-manufacturers, sub-indexes for face-to-face services increased as the government ended restrictions in late March that had been adopted to counter the spread of the Omicron coronavirus variant.
"Our department store sales grew from a year earlier as customers are coming out after the COVID-19 curbs were lifted," said a retail manager.
On the outlook, manufacturers expected their mood to remain steady at plus 11 three months ahead, whereas services firms projected that sentiment would rise slightly to plus 12.
Managers in a wide variety of sectors, from nonferrous manufacturing to property to wholesaling, expressed concerns over rising energy and input costs, with many struggling to pass them on through price increases to secure profit margins, the poll showed.
(Reporting by Kantaro Komiya; Editing by Edmund Klamann)