Japan's sentiment improves in materials on the manufacturing side

For manufacturers as a whole, the DI rose for a second consecutive month, but is still down a cumulative three points over the past three months. Within manufacturing, the DI rose by two points in materials industries to +10 and was flat in manufactured goods at +16, but improved in only three of nine industries overall.

The DI fell in five industries, with especially steep drops in oil refining to -20 and food to +10.

The sluggish sentiment in manufacturing despite the favourable exchange rate environment may be due to such weakness in overseas demand. 

In non-manufacturing, on the other hand, the DI was up in four of six industries (real estate/construction and other services were the exceptions). One key focus was the retail industry, where the DI rose by 12 points. This marked the strongest reading since last March's +38 and a cumulative leap of 50 points over the past four months. 

Sentiment indicators have shown signs of improvement since March, but the Reuters Tankan DI for retailers has improved at an even faster pace. This contrasts with the slump in actual consumption indicators. Whether this gap is resolved toward the former or the latter will be a focus going forward.