EcoWeek

Improvement in manufacturing, worries persist in services

Eco week 21-13 // 2 April 2021  
economic-research.bnpparibas.com  
7
ECONOMIC PULSE  
JAPAN : IMPROVEMENT IN MANUFACTURING, WORRIES PERSIST IN SERVICES  
The slow rollout of the vaccination programme in Japan can be Confidence is particularly weak in the “hotels and restaurants” sector,  
explained by the fact that the country suffered less than others during which continue to suffer from the absence of foreign tourism. The  
the pandemic, and thus adopted lighter restrictions than elsewhere. recent decision not to open up the country to international visitors  
The slow progress in vaccination has not prevented an improvement in during the Tokyo Olympics this summer is a fresh blow. Companies in  
business leaders’ confidence.  
the sectors affected will therefore need to rely on domestic demand.  
As in Europe, this observation is particularly true in the manufacturing On this point, the rebound in Japanese consumer confidence in  
sector, which has been hit less hard by health measures than the February 2021 (to 33.8, from 29.6 in January) is good news but still  
services sector. According to the Bank of Japan’s Tankan survey, major needs to be confirmed. This indicator remains low relative to its long-  
Japanese companies are regaining confidence and the index for these term average. The composite Purchasing Managers Indices (PMI) for  
firms returned to positive territory in Q1 2021 for the first time since Q3 the manufacturing and services sectors send similar messages. The  
2
019. It reached +5 (the percentage gap between companies believing manufacturing PMI has improved over the past three months, rising  
conditions are favourable and those believing the opposite), from -10 above its long-term average and reaching 52.7 in March 2021. The  
in Q4 2020 and -34 at the peak of the crisis last year. In recent months, services PMI, meanwhile, is struggling to recover and remains below  
Japanese industrial companies have benefited from renewed demand the threshold of 50 that separates expansion from recession. It was  
from China – one of the most important trading partner – as well as virtually flat, at just 46.5, in March. One thing is certain: the Bank  
from the US. Japanese exporters are likely to continue to take advantage of Japan will do everything to avoid tightening financing conditions,  
of the improvement in the Chinese economy and the massive stimulus against a background of persistently very weak inflation.  
package launched in the US. For non-manufacturing companies, there  
has also been a marked improvement since the end of 2020, although  
the Tankan index remains negative and below its long-term average.  
Louis Boisset  
QUARTERLY CHANGES  
Consumer confidence  
3-month moving average (actual)  
-- 3-month moving average (4 months ago)  
2
1
0
.0  
.0  
.0  
-
Tankan: Large enterprises, Manufacturing  
Industrial production  
-
-
-
-
1.0  
2.0  
3.0  
4.0  
Tankan: Large enterprises,  
Nonmanufacturing  
Unemployment rate  
PMI: Manufacturing - New export orders  
Retail sales  
PMI: Services  
CPI  
PMI: Manufacturing  
Machinery orders  
SOURCE: THOMSON REUTERS, BNP PARIBAS  
The indicators in the radar are all transformed into ‘z-scores’ (deviations from the long-term average, as standard deviations). These z-scores have mean zero and their values  
are between -4 and +2. In the radar chart, the blue area shows the actual conditions of economic activity. It is compared with the situation four months earlier (dotted-line). An  
expansion of the blue area compared to the dotted area signals an increase in the variable.  
The bank  
for a changing  
world  
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