By Makiko Yamazaki
TOKYO (Reuters) -Business confidence in Japan’s auto sector has plunged, helping push a manufacturers’ sentiment index to its first decline in four months, the Reuters Tankan poll showed, as firms grapple with U.S. tariffs, rising costs and weak overseas demand.
The monthly poll, which tracks the Bank of Japan’s closely watched quarterly business survey, showed the manufacturers’ index dropped to plus 8 in October from plus 13 in September, the lowest reading since July.
It is also expected to slip to plus 4 by January.
The auto and transport machinery industry had the most precipitous decline in confidence, with its index tumbling to plus 9 from plus 33.
The sector, which accounted for about a third of exports to the United States last year and employs about 8% of Japan’s workforce, has to contend with U.S. tariffs of 15% after a trade deal with the Trump administration.
Rising input costs – from raw materials to labour and energy – were also a recurring theme across many sectors.
“We’re seeing cost increases across the board, and not all of it can be passed on to customers,” wrote a manager at transport equipment maker.
The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.
The survey, taken between September 24 and October 3, was sent to nearly 500 major non-financial companies, of which 237 responded. Respondents take part on condition of anonymity.
Of the nine manufacturing industries surveyed, five saw their sub-indexes falling in October. The machinery and precision equipment sectors also highlighted tariff pain.
“The additional costs from U.S. tariffs, including those on steel and aluminium, are weighing on our outlook,” wrote a manager at a machinery firm.
Others pointed to China’s economic slowdown, which has led to weaker demand and increased competition from low-cost imports.
Sagging overseas demand is expected to be a key culprit for a likely annualised 1.1% contraction in the July-September quarter, according to a poll of 37 economists by the Japan Center for Economic Research.
The non-manufacturers’ mood index held steady at plus 27, with firms projecting a slight dip to plus 26 by January.
Sentiment for the retail sector improved, with its index jumping to plus 27 from plus 20, supported by recovering urban sales and inbound tourism.
(Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)
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