Japan's latest Business Outlook Survey, for Q4 2024, has been published.
The TL;DR is:
- Large corporations continue to see modest positive sentiment, but the outlook is gradually softening.
- Small corporations remain under pressure, with persistent pessimism and labor shortages.
- Growth in non-manufacturing is outpacing manufacturing, with profitability challenges evident for the latter.
- Investment remains a bright spot, showing strong commitment to growth despite economic headwinds.
More detail, if you want it, is below.
The Business Outlook Survey is a periodic report released by Japan’s Ministry of Finance (MOF) and the Cabinet Office. It provides a comprehensive overview of the business sentiment and economic conditions among Japanese corporations across different sizes and industries. The survey is designed to gauge the current state of business conditions and to offer insights into future expectations.
In summary (the full report is here)
1. Business Conditions (Business Survey Index)
Large Corporations (Capital ≥ 1 billion yen)
- Overall index improved slightly to 5.7 in Oct-Dec 2024 (from 5.1 in Jul-Sep).
- Manufacturing rose to 6.3, while non-manufacturing held steady at 5.4.
- Outlook for Jan-Mar 2025 and Apr-Jun 2025 shows a gradual decline across industries.
Mid-Sized Corporations (Capital 100M-1B yen)
- Overall index rose to 3.8 from 2.4 in the prior quarter, with stability forecast through mid-2025.
Small Corporations (Capital 10-100M yen)
- Index improved to -4.7 but remains in negative territory. Further declines are expected in early 2025.
2. Domestic Economic Conditions (Business Survey Index)
Large Corporations
- Decline in sentiment across all industries (4.2 in Oct-Dec vs. 5.5 in Jul-Sep).
- Manufacturing dipped to 2.0, with moderate improvement expected by Apr-Jun 2025.
- Non-manufacturing followed a similar trend, declining to 5.3 but showing resilience.
Mid-Sized and Small Corporations
- Mid-sized firms saw a minor decline (1.4 in Oct-Dec).
- Small firms remain pessimistic, though slightly less so than in the previous quarter (-11.7 vs. -13.5).
3. Employment (Balance of "Insufficient" vs. "Excessive")
Large Corporations
- Labor shortages persist, with the index slightly rising to 27.4 for Dec 2024.
- Manufacturing and non-manufacturing exhibit similar trends, with outlooks indicating slight easing by mid-2025.
Mid-Sized and Small Corporations
- Labor shortages are more pronounced, particularly for mid-sized firms, where the index reached 41.4.
4. Sales Growth (FY 2024)
- Overall sales growth projected at 2.7%.
- Manufacturing: 2.4%.
- Non-manufacturing: 2.8%.
5. Ordinary Profits (FY 2024)
- Overall profits expected to grow 2.0%.
- Manufacturing profits to decline by -4.2%, while non-manufacturing profits rise by 4.5%.
6. Investment in Software and Equipment (FY 2024)
- Total investment growth forecast at 10.3%, driven by:
- Manufacturing: 11.5%.
- Non-manufacturing: 9.7%.
Key Insights:
- Large corporations continue to see modest positive sentiment, but the outlook is gradually softening.
- Small corporations remain under pressure, with persistent pessimism and labor shortages.
- Growth in non-manufacturing is outpacing manufacturing, with profitability challenges evident for the latter.
- Investment remains a bright spot, showing strong commitment to growth despite economic headwinds.
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Earlier from Japan:
