Japan has released its latest Business Outlook Survey for the fourth quarter of 2024, shedding light on current sentiments and expected trends across various sectors of the economy. The periodic report, conducted by Japan's Ministry of Finance and the Cabinet Office, assesses the perspectives of corporations of differing sizes and industries, providing valuable insights into the business climate.
The findings indicate a cautious yet positively bent outlook among large corporations, with the Business Survey Index rising slightly to 5.7 for the October to December 2024 period, compared to 5.1 in the previous quarter. Within this group, the manufacturing sector's sentiment improved to 6.3, while non-manufacturing remained stable at 5.4. However, forecasts for early 2025 suggest a gradual decline in sentiment across all industries.
Mid-sized corporations, defined as those with capital between 100 million and 1 billion yen, showed a notable improvement in their overall index, which climbed to 3.8 from 2.4. This mid-sized group is expected to maintain stability through mid-2025. Conversely, small corporations, with capital ranging from 10 to 100 million yen, improved slightly to -4.7. Despite this, their outlook remains largely pessimistic, with further declines anticipated in the first quarter of 2025.
The survey also highlights trends in domestic economic conditions. Large corporations experienced a decrease in sentiment across all sectors, with the overall index dropping to 4.2 from 5.5. Manufacturing sentiment fell sharply to 2.0, with only moderate recovery expected by the second quarter of 2025. Non-manufacturing also followed a similar downward trajectory, decreasing to 5.3, although it displayed some resilience.
Employment conditions pose additional challenges for businesses. Large corporations continue to grapple with persistent labour shortages, as evidenced by an increase in the labour shortage index to 27.4 for December 2024. Manufacturing and non-manufacturing sectors reflect similar trends, with expectations of easing shortages by mid-2025. Mid-sized and small corporations report even more acute labour shortages, the former reaching an index high of 41.4.
In terms of projected sales growth for fiscal year 2024, an overall growth of 2.7% is anticipated, with non-manufacturing outpacing manufacturing at 2.8% against 2.4%. Ordinary profits for businesses are also on a divergent path; overall profits are expected to grow by 2.0%, while manufacturing profits are predicted to decline by a substantial 4.2%. In contrast, non-manufacturing profits are projected to rise by 4.5%.
Investment remains a notable bright spot in the outlook, with total anticipated growth in investment projected at 10.3% for FY 2024. Both manufacturing and non-manufacturing sectors are expected to contribute positively to this figure, with forecasts indicating manufacturing investment growth at 11.5% and non-manufacturing at 9.7%.
The report encapsulates a complex picture of Japan's economic landscape, highlighting a gradual softening in sentiment among large corporations, persistent challenges faced by small businesses, and a resilient non-manufacturing sector.
Source: Noah Wire Services