Japan Mfg Confidence Up: Yen Boosts Sentiment

Japanese manufacturers' confidence saw an encouraging rise in February, marking the first increase in three months. The sentiment index climbed to plus 13 from plus 7 in January, reaching its highest point since November. This improvement was significantly driven by a stronger performance in machinery orders and the continued weakness of the yen.

Machinery makers reported the most substantial gain in sentiment, with their index jumping to plus 15. Managers in this sector cited improved visibility for orders, sales, and profits, as well as the benefit of a stable, weak yen. Conversely, the transport machinery sector, which includes automakers, saw a dip in confidence, falling to plus 33 from plus 40, attributed to weak domestic auto sales and tougher Chinese rare-earth regulations.

Despite the positive trend in manufacturing, other sectors face challenges. Non-manufacturers' confidence slid to plus 25 from plus 32, with managers noting a decline in inbound demand from China and increased competition. Retailers also reported softer tourist spending and cautious consumer behavior, with tax-free sales to Chinese tourists remaining significantly below the previous year.

Looking ahead, manufacturers anticipate a slight easing of sentiment to plus 10 by May, while non-manufacturers foresee further slippage to plus 23, indicating continued caution regarding the economic outlook.