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The
improvement in the key so-called diffusion index in the closely
watched “tankan” report, recorded for the fourth quarter
straight, comes even as worries grow about Japan’s economic
growth and oil supplies because of the war in Iran.
The survey is an indicator of companies foreseeing good
conditions minus those feeling pessimistic.
The index for large non-manufacturers, such as the service
sector, stood unchanged from the last tankan at 36.
Japan’s inflation has so far remained relatively moderate, but
worries are growing about prices at the gas stands and other
products. Investors and consumers alike are filled with
uncertainty about how much longer the war may last and what U.S.
President Donald Trump might say next. Japan’s benchmark Nikkei
225 has gyrated wildly in recent weeks.
Analysts say the Bank of Japan may start to raise interest rates
because of concerns about inflation, given the soaring energy
costs and declining yen — two elements that greatly affect
living costs for the average Japanese consumer.
Historically, Japan has benefited from a weak yen because of its
giant exports, exemplified in autos and electronics. A weak yen
raises the value of exports’ earnings when converted into yen.
But in recent years, a weak yen is working as a negative, as
resource-poor Japan imports much of its energy, as well as other
key products such as food and manufacturing components.
The U.S. dollar has been soaring against the yen lately.
Japan’s central bank had a negative interest rate policy for
years to fight deflation until it normalized policy in 2024. It
kept the rate unchanged at 0.75% in March. The next Bank of
Japan monetary policy board meeting is set for April 27 and 28.
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