Japan's Economy Stays Firm Amid Labour Shortages and Price Pressures
The latest Tankan report for Japan presents a mixed picture of the economy. Large manufacturers saw their sentiment improve to its strongest reading in years, rising to 24 from 22, while small manufacturers also strengthened to 14 from 9.
However, other parts of the survey remain relatively firm, with employment conditions staying deeply negative at -38 and signalling persistent labour shortages.
The report suggests that price pressures are still elevated, despite manufacturers expecting some moderation in their input costs. The large-manufacturer input-price index eased to 59, but firms expect it to fall to 55 next quarter. Meanwhile, the output-price index remains firm, with businesses expecting selling-price pressures to rise further.
The BOJ's tightening cycle is still likely to continue, given persistent labour shortages and higher output-price expectations. However, inflation expectations have shown little renewed acceleration, and manufacturers expect some moderation in conditions.