Japan's Business Sentiment Remains Steady Amid Economic Pressures

The Bank of Japan's 'tankan' survey reported unchanged business sentiment among large manufacturers for the July-September quarter. The benchmark index held steady at plus-13, matching the previous quarter. Economic growth continues despite challenges, with a slight rise in nonmanufacturing optimism and stable expectations for consumer price inflation.

Business sentiment among Japan's large manufacturers stood unchanged in the latest quarter from the previous quarter, according to a closely watched survey called 'tankan' released Tuesday.

The Bank of Japan survey put the benchmark index at plus-13 for the July-September quarter, the same from the previous survey conducted for April-June. A positive number means more companies said they were optimistic about business conditions than those feeling pessimistic.

The index for large nonmanufacturers stood at plus-34, up from plus-33 the previous quarter. The results were in line with analyst forecasts.

Japan's economic growth is thought to be on relatively solid ground, managing to grow despite pressures from a declining workforce and a weakening currency. Recent data also show an uptick in average wages in some sectors, adding to market optimism. Tourism is booming as well, now that coronavirus-related restrictions have been lifted.

The 'tankan' is a key indicator closely watched to gauge potential central bank actions on interest rates. Following the end of negative interest rates in March, the Bank of Japan raised its short-term policy rate to 0.25% in July, and aims to continue to raise rates if its 2% inflation target is maintained.

Companies expect consumer prices to rise 2.4% annually, unchanged from their expectations three months ago. Japan's economy, the world's fourth largest, saw an annual growth rate of 2.9%, driven by wage growth and consumer spending despite risks from the Chinese and U.S. economies. Prime Minister Fumio Kishida's resignation is not expected to lead to major economic policy changes with his likely successor, Shigeru Ishiba, taking office.

(With inputs from agencies.)