The Bank of Japan's latest Tankan survey covering the April-June period shows that clouds are hanging over the Japanese economy. Business confidence among large manufacturers, for example, has deteriorated for three consecutive quarters. Their diffusion index — the percentage of firms reporting a favorable business environment minus that of firms reporting an unfavorable one — stood at 5, down six points from the March survey and the lowest level since September 2003.
The diffusion index of large nonmanufacturers, small manufacturers and small nonmanufacturers also worsened to 10 (down two points), minus 10 (down four points) and minus 20 (down five points), respectively.
The survey notes that rising costs of crude oil and other raw materials are impacting profits. It shows that manufacturers' sentiments concerning the purchase costs of raw materials have reached their worst level since 1980.
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