Japan Economic Research21 February 2024J P M O R G A Nwww.jpmorganmarkets.comEconomic and Policy ResearchBenjamin Shatil(81-3) 6736-1730benjamin.shatil@jpmorgan.comJPMorgan Securities Japan Co., Ltd.•Manufacturing sentiment flips negative in February•Auto sector shutdowns weighing on activity•Exports weakened through January on broad-based declinesSentiment among large manufacturers fell 7 points to -1 in the February Reuters Tankan survey, the first time since April last year that the balance of respondents have reported negative business conditions. Non-manufacturing sentiment slipped a smaller 3 points to 26, leaving the index roughly in line with its fairly high level through the past several months. The manufacturing sector data undershot our expectations for a modest rise; the risk now is that Thursday�s manufacturing PMI also comes in weak.After a brief stabilization in manufacturing, activity appears to be sliding again. Sentiment among manufacturers has fallen for two consecutive months, in part reflecting the drag from scheduled plant shutdowns at a large auto producer. Auto sector sentiment declined 14 points, posting its second consecutive monthly fall, and leaving the index at its lowest level since early last year. Outlook indices suggest some improvement in business conditions through 1Q; producers essentially expect conditions to return to their (fairly depressed) January levels. By contrast, services sector sentiment continues to hold up. Retail sentiment remains close to two decade highs, likely reflecting the impact of firms� increasing ability to hike prices and widen margins. Trade data for January, also released this morning, suggest a similar downbeat outcome. Export volumes fell 4.6%m/m sa and were down -2.2%3m/3m saar. Weakness largely reflected a 15%m/m sa fall in autos. However, other product groups, including capital goods (-8.5%) and tech (-2.8%), were also weak. By country, export volumes to the US and EU posted double-digit sequential declines. The one bright spot was regional tech exports, likely benefitting from the lagged impact of a regional semiconductor cycle upswing. Volumes of electronic shipments to China were up 5.9%m/m sa. Alongside the weak export data, real imports plunged 9.7%m/m sa on large declines in volumes of chemicals and tech products.See page 8 for analyst certification and important disclosures.Japan: Down another gear in early 1Q data2Benjamin Shatil (81-3) 6736-1730benjamin.shatil@jpmorgan.comJPMorgan Securities Japan Co., Ltd.Japan Economic ResearchJapan: Down another gear in early 1Q data21 February 2024J P M O R G A N-40-2002040081012141618202224DI, level of conditions, boxes denote 3-mo outlookReuters Tankan large firms sentiment - HeadlineSource: Reuters, J.P. MorganMfg.Non-mfg.020406080100081012141618202224% of sub-sectors reporting positive sentiment indicesReuters Tankan large firms sentiment - Headline di...
