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Confidence among big Japan's manufacturers deteriorated in the three months to March and is expected to decline further ahead, a closely watched Bank of Japan survey showed. The headline index for big manufacturers' sentiment came in at plus 6 in March, down from plus 12 seen three months ago, according to the Bank of Japan's quarterly "tankan" survey. Domestic and overseas demand conditions both deteriorated further in the first quarter, while inventory levels increased. Moreover, inflationary pressures cooled last quarter, with both input and output prices declining at a steeper pace than in the final quarter of 2015. Manufacturing sales are predicted to decline 1.5% in the current financial year, and 0.6% in the 2016 financial year. Profit expectations for the 2015 financial year were revised sharply lower to -3.5%.
On top of that, Japan's manufacturing activity contracted in March at the fastest pace in more than three years as new export orders shrank sharply. The Markit/Nikkei Final Japan manufacturing PMI fell to 49.1 in March on a seasonally adjusted basis, down from the final 50.1 in February. The sub-index for new export orders dived to 46.1, above the flash reading of 45.9 but still well below the 49.0 recorded in February. New export orders contracted at the fastest since January 2013.
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