Service sector index- 3 in April vs. 5 in March.
Tokyo, 16 April- Confidence among Japanese manufacturers rose to a more than two-year high in April as favourable demand in the electronics market and strong exchange rate conditions boosted prospects for exporters, a Reuters poll showed on Friday.
Manufacturers in the service industry were also slightly less pessimistic than the last month, according to the Reuters Tankan poll, which tracks the quarterly survey of the Bank of Japan closely followed by Tankan.
But the manufacturers cited uncertainty about the global economic outlook and highlighted problems with sourcing materials for production, in a sign that Japan's recovery from the coronavirus crisis remains patchy. Many companies are reluctant to invest amid concerns over a fourth wave of COVID-19 cases.
The semiconductor market is recovering, but on the other hand, conditions for acquiring materials are high due to a rapid rise said a manager at a machinery manufacturer.
However, electronic component makers have gained as the pandemic has fuelled demand for advanced chips and other products to power devices such as smartphones and laptops, sparking a global chip shortage.
The Reuters Tankan sentiment index for manufacturers improved in February to 13 from 6 in the previous month and hit its highest since February 2019 as the survey carried out from April 2- 13 showed.
The service sector index remained in contraction for the 14th straight month, rising from minus 5 in March according to the poll of 482 large and mid-sized companies in which 243 firms responded under the condition of anonymity.
The Reuters Tankan index readings are derived by subtracting the percentage of respondents who say that the conditions are good from those who say that they are poor. A negative reading means optimists outnumber pessimists.
While there is still impact from the coronavirus, our profits are expected to increase thanks to cost reduction, a steel maker wrote in the survey.
Another manager, a metal products maker, said the conditions were good because of the stability of the yen against both the US dollar and the euro.
The first-quarter tankan survey results from the BOJ showed that the sentiment of companies improved in the first quarter to pre-pandemic levels as companies increased their capital spending plans.
The central bank, which loosened its grip on long-term interest rates last month and laid the groundwork to decrease its huge asset purchases, will hold its next rate review April 26 -- 27.
In the Reuters Tankan survey, others said it was difficult to secure key production ingredients, which include raw materials and intermediate goods, from the business activity.
The production decreased due to a lack of raw materials, said a manager at a steel maker.
Another manager at an electric machinery manufacturer also said his company saw a decline in sales due to a shortage of production materials.
The confidence of the manufacturers was seen unchanged at 13 in July, while that of the service sector firms was forecasted to rise to 2, the survey revealed.