By Kantaro Komiya
TOKYO (Reuters) -Japanese manufacturers’ business confidence improved slightly in July and is expected to strengthen further in the coming months despite ongoing concerns about U.S. tariffs, thanks to recovery in the semiconductor sector, a Reuters Tankan poll showed.
The monthly poll, which tracks the Bank of Japan’s quarterly tankan business survey, showed the manufacturers’ sentiment index rising to plus 7 in July from plus 6 in June, while the service-sector index remained unchanged at plus 30 for the third consecutive month.
Manufacturers expect sentiment to improve further to plus 8 by October, while service firms forecast their outlook will soften to plus 27, according to the July 2-11 survey of 497 major non-financial companies, of which 241 responded on condition of anonymity.
Among manufacturers, the electronics machinery sector index improved to minus 4 in July from minus 16 in June, and chemicals rose to plus 18 from plus 12, with some citing the ameliorating chip demand.
“There’s brightness visible in some parts of the semiconductor industry, though other areas remain stagnant,” a rubber maker manager said.
In contrast, the transport machinery sector, which includes Japan’s crucial car industry, saw its index falling to plus 9 from plus 20 in June, with some managers referring to the impact of U.S. 25% auto tariffs on export volumes and costs.
Although overall sentiment remains in positive territory, manufacturers continue to monitor potential risks from U.S. trade policies.
“While there are predictions among our users that the impact of Trump’s tariffs can be negative, for now we’re in a wait-and-see situation,” a paper and pulp industry manager said, highlighting the prevailing uncertainty.
Some expressed concern about investment appetite. “Our customers are becoming cautious about capital expenditure due to economic slowdown caused by U.S. tariffs and uncertainty in the Middle East situation,” one machinery maker manager noted.
The service sector was mixed overall, with wholesalers’ confidence improving but the sentiment of property, retail, IT and transport sectors down from June.
A retail company manager noted an ambivalent mood, with supermarkets benefiting from higher customer spending on successful price hikes, while department stores suffered from a decline in sales compared to last year’s surge in inbound tourism.
The poll results come as Japan’s export-dependent economy faces headwinds from global trade tensions. Japan’s economy shrank in the first quarter on lukewarm consumption. Exports fell in May for the first time in eight months, stoking fears of a recession, defined as two straight quarters of contraction.
(Reporting by Kantaro Komiya;Editing by Alexandra Hudson)
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