Japanese business sentiment hits two-year high

Japanese business sentiment hits two-year high

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Sentiment among large Japanese manufacturers has risen to its strongest level since the final quarter of 2018 as the global economy rebounds from the coronavirus pandemic.

The Bank of Japan's Tankan index rose from plus 5 to plus 14 in the second quarter of the year, slightly below analyst expectations of plus 15, signalling a robust expansion in output.

But sentiment in the services sector was disappointing, with the index rising from minus 1 to plus 1 as Japan experienced a wave of Covid-19 cases that triggered a state of emergency in large cities.

The readings on the Tankan, widely regarded as Japan's most reliable economic data series, suggested that Asia's only G7 economy was well-positioned for growth in the second half of the year.

Tom Learmouth, Japan economist at Capital Economics, a consultancy, said the Tankan suggested a weak start to the year would soon give way to a strong recovery. He forecast Japanese output would return to pre-virus levels by the end of the year.

John Vail, chief global strategist at Nikko Asset Management, said the index pointed to a robust outlook. "The Tankan for large manufacturers showed current conditions surged to well above