Japan Business Mood Remains Firm, Keeping BOJ on Hike Track

(Bloomberg) — Confidence among Japan’s large manufacturers held steady from three months ago, keeping the Bank of Japan on track to consider a rate hike late this year or early next.

Most Read from Bloomberg

An index of sentiment among the country’s biggest manufacturers held steady at 13 in September, according to the BOJ’s quarterly Tankan report Tuesday. The gauge for the biggest non-manufacturers rose to 34. Economists had expected the readings to decline to 12 for manufacturers and to 32 for the service sector.

The figures for both groups show optimists outnumber pessimists.

The Tankan survey is among key data points before the BOJ’s policy board next sets policy on Oct. 31. While factors including a general election are expected to keep the BOJ on hold, the continued strength in the reading may prompt economists to consider a rate hike in their risk scenarios for the meeting.

The latest Bloomberg survey showed that a majority of economists forecast the bank will raise borrowing costs by the end of January, with 15% anticipating a move in October.

Tuesday’s report showed that sentiment among electronic equipment and ship and heavy machinery makers improved. The mood among oil and coal product makers slumped.

The solid business sentiment will likely be welcomed by incoming premier Shigeru Ishiba, who is expected to be elected prime minister later Tuesday after he prevailed in last week’s Liberal Democratic Party leadership vote. Ishiba said he will call a national election for Oct. 27.

In his campaign, Ishiba emphasized the need for regional economic development to reverse the drag stemming from rural depopulation with the aid of government spending. The 67-year old party veteran also called for clearer communication on the BOJ’s plans to normalize policy while remaining supportive of the bank’s gradual move away from ultra-low rates.

A separate report by the Labor Ministry showed that Japan’s job market remained tight in August. The country’s unemployment rate dropped to 2.5% from 2.7% a month earlier, while the job-to-applicant ratio edged down to 1.23 from 1.24, meaning that there were 123 job posts available to every 100 applicants.

–With assistance from Paul Jackson.

(Updates with more details.)

Most Read from Bloomberg Businessweek

Story continues

©2024 Bloomberg L.P.