Trucks caryying car parts enter its Tsutsumi Factory in Toyota, Aichi Prefecture. Confidence is growing at major factories in Japan. Photo: AFP / Satoshi Oga / The Yomiuri Shimbun

Confidence among major Japanese manufacturers has improved for the fifth consecutive quarter, a key business survey showed Friday.

The Bank of Japan’s Tankan business survey – a quarterly poll of about 10,000 companies – showed a reading of plus 18 for major manufacturers, up from plus 14 in the previous quarter.

The short-term business sentiment survey reports the difference between the percentage of firms that are upbeat and those that see conditions as unfavourable.

A positive figure means more manufacturers see business conditions as favourable than those that consider them unfavourable. It is considered to be the broadest indicator of how Japan Inc is faring.

The latest reading was slightly better than market expectations of plus 13, and comes after it hit its highest level since 2018 in the previous quarters on hopes for a strong post-pandemic recovery despite some setbacks.

“The latest Tankan survey was stronger than most had anticipated, supporting our view that the economy will recover rapidly as the Delta wave has ebbed,” said Marcel Thieliant, senior Japan economist at Capital Economics, in a note.

The figure for large manufacturers has improved for five straight quarters, after plunging into negative territory in April 2020 for the first time in seven years.

For medium-sized firms, confidence was up slightly, while sentiment for small companies improved to minus three from minus seven.

Among large non-manufacturing firms, it picked up only slightly, with spending hit by successive virus measures this year.

Thieliant noted that “the survey provided further evidence of supply shortages,” adding that firms are responding by increasing capital expenditure and raising prices.

Japan has seen a smaller virus outbreak than many countries, with about 17,500 deaths despite avoiding harsh lockdowns.

But emergency virus measures that largely affected bars and restaurants as well as limiting large events have been in place in parts of the country for a large part of the year, lifting finally on Friday.

The vaccination program, which began later than in many developed countries and started slowly, has picked up speed however, with around 60% of the population now fully inoculated.