Confidence among Japan's biggest manufacturers has slipped for the second quarter in a row, a key central bank survey showed today.
The Bank of Japan's Tankan report - a quarterly survey of about 10,000 companies - showed a reading of 21 among major manufacturers in its June survey compared to a figure of 24 in the March report.
The latest Tankan, however, hardly made economists pessimistic about the world's third largest economy, with the headline index still close to its highest level in over a decade.
The Tankan report, the broadest indicator of how Japan Inc is faring, marks the difference between the percentage of firms that are upbeat and those that see conditions as unfavourable.
The latest reading is slightly lower than market expectations of 22, according to data compiled by Bloomberg News.
Analysts said the second quarterly decline in a row is certainly not good, but the level of business confidence is still high.
The said that while the country is not facing a recession phase, the pace of economic expansion is slowing down.
Confidence fell among motor vehicle makers and electronics makers as the average predicted yen rate for the business year from April appreciated to 107.26 yen to the dollar in the latest survey from 109.66 yen predicted in March.
A strong yen is negative for Japanese exporters as it makes their products less competitive abroad and erodes profits when repatriated.
Analysts said that declines in the carsector - even though their sales are strong - reflect geopolitical risks, including US President Donald Trump's threat of tariffs.
But as yet, concerns over protectionist policies have so far have not affected plans of capital investment nor demand-supply conditions," they added.
The sentiment among iron and steelmakers, and among nonferrous metals makers also slipped, amid lingering worries over the US move to impose hefty tariffs on steel and aluminium.
The index for non-manufacturers edged up to 24 from 23, the first rise in the past four quarters, or since a year ago.
But confidence among retailers dropped to 0 from 11, which analysts said was a slight concern.
Japan's economy slid into negative territory for the first time in two years at the beginning of the year, technically ending its longest period of expansion since the 'bubble' days of the 1980s.
But the contraction by 0.2% quarter-on-quarter in the three months from January to March does not suggest a recession, economists say.
Economists argue Japan is on a solid recovery path on the back of a global economic recovery, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.
