Sentiment among Japan's large manufacturers improved for the fourth consecutive quarter, even amid the outbreak of war in the Middle East, according to a survey that supports the Bank of Japan's policy stance of continuing to raise interest rates.
The BOJ's Tankan survey released on Wednesday showed that the large manufacturers' sentiment index rose to 17 in March, up from a revised 16 in the previous quarter. The median forecast from a Bloomberg survey of economists was 16.
The confidence index for large non-manufacturers held steady at 36 after a revision to the prior quarter's data, remaining near its strongest level since 1991. A positive reading indicates that more companies view business conditions as "favorable" than "unfavorable."
However, large companies' outlook for the future weakened slightly. The outlook index for large manufacturers dipped to 14, while the index for large non-manufacturers fell to 29 from a revised 31.
As one of the most closely watched indicators by the Bank of Japan, the Tankan survey shows that overall corporate sentiment in Japan remains solid, at least for now. Once the impact of the Iran conflict becomes clearer, the Tankan survey will serve as one of the supporting factors if the BOJ opts to raise interest rates as early as this month. Traders currently estimate the probability of a BOJ rate hike this month at around 69%.
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