Business sentiment among large Japanese manufacturers dipped for the first time in two years amid concerns over U.S. trade policy and a stronger yen, the Bank of Japan’s Tankan survey showed Monday.
The key index measuring confidence among companies such as automobile and electronics makers stood at plus 24 in March, down 2 points from December. The result was weaker than the average market forecast of plus 25 in a Kyodo News poll.
U.S. President Donald Trump’s decision to levy stiff tariffs on steel and aluminum imports had a sobering effect after a stretch of optimism fueled by strong demand for Japanese exports.
Japan was not included on a list of economies recently unveiled by Washington that are exempt from the tariffs.
A strengthening yen, which generally hurts manufacturers by making domestically made products less price competitive abroad and undermining the value of overseas profits in yen terms, also weighed down sentiment.
Large manufacturers expect the U.S. dollar to average 109.66 yen through the new fiscal year that began on Sunday, compared with an estimated 110.67 yen for the previous year.
A shortage of workers continued to be a problem, with the index for firms across all industries and sizes hitting the lowest point since November 1991 at minus 34.
Construction firms and restaurants were particularly affected, pushing the headline index for large nonmanufacturers down 2 points from the previous survey to plus 23, the lowest in 18 months.
The indexes represent the percentage of companies reporting favorable business conditions minus the percentage reporting unfavorable ones.
Large companies, classified as those with capital stock of more than 1 billion yen ($9.4 million), across all industries planned to raise capital expenditure this fiscal year by 2.3 percent compared to the previous year.
The figure was down from an estimated 5.2 percent rise for the year through March 31.
The BOJ surveyed a total of 10,020 companies between Feb. 26 and March 30, of which 99.3 percent responded.