JETRO: Japanese Business Sentiment in East Asia Declined in August.

Tokyo, Japan, Aug 22, 2005 - (JCN Newswire) - JETRO's monthly survey of Japanese companies and affiliates operating in 12 countries/regions of East Asia revealed that overall business sentiment declined in August in the ASEAN and North Asia (including China) regions, on the back of rising crude oil and raw material prices. After a brief spell in positive terrirory (July survey), the index for ASEAN returned to negative territory in August.

Japanese business sentiment in the ASEAN and North Asia regions has been depressed since earlier this year, specifically in Malaysia, the Philippines, Singapore and Taiwan. Even in Indonesia and Thailand, where favorable sentiment has been recorded in recent months, business sentiment in August reveals that firms there are starting to worry about future business prospects in their operating region.

JETRO polls the companies to measure year-on-year changes, expressed as diffusion indices, in their business outlooks for the current month and the next two to three months going forward.

Overall current business sentiment for the five ASEAN countries included in the survey fell by 2.6 points in August, with the index slipping into negative territory for the third time this year. Current sentiment declined over the previous month in Indonesia, the Philippines and Thailand, while indices remained in negative territory in Malaysia, Singapore and the Philippines for the eighth, seventh and fourth straight months respectively. Over the past several months, Japanese business sentiment has been favorable in Indonesia and Thailand, led by booming auto industries in both countries. However, the index for Thailand slipped into single-digits for the first time in 20 months, falling by 12.9 points in August, while the index for Indonesia fell by 4.7 points.

Forward business sentiment improved in Malaysia and the Philippines, while declining in Indonesia, Singapore and Thailand; indices for Singapore and Malaysia remained in negative territory, while the index for Thailand fell into negative territory for the first time since March 2002.

Overall current business sentiment declined 1.4 points over the previous month in China and North Asia, with sentiments slipping in all locations (with the exception of East China and Hong Kong). The index for Taiwan remained in negative territory for the sixth straight month, while the index for East China returned to positive territory in August, after dipping into negative territory for the first time in this survey's history in July.

Forward business sentiment declined again in East China and Hong Kong, while improving in all other locations; the index for Taiwan remained in negative territory in the August survey.

Survey results suggest that the July 21st revaluation of the Chinese Yuan (by 2%) had little or no impact (to date) on Japanese businesses operating in China.

A total of 755 replies were received in ASEAN countries (128 in Indonesia, 118 in Malaysia, 188 in the Philippines, 222 in Singapore and 99 in Thailand), 232 in China (60 in the North, 54 in the Northeast, 72 in the East and 46 in the South); 143 in Hong Kong; 36 in the ROK and 119 in Taiwan.

JETRO, in cooperation with Japan's Ministry of Economy, Trade and Industry , has been conducting the survey in the first week of every month since June 2001 in the five major ASEAN countries, since June 2002 in South China, Hong Kong and Taiwan, since July 2002 in North and East China, and since October 2002 in the ROK and Northeast China. Results for the ROK are broken down into manufacturing and non-manufacturing only, but not by industry, and no breakdown is given for Northeast China, due to the small numbers of companies surveyed in these areas.

The aim of the survey is to provide up-to-date information on business conditions in the Asian economy to help companies develop more effective business strategies. Firms are asked to compare earnings prospects, supply and demand, inventory, sales prices and accounts receivable with the same period one year earlier. The current month and the following two to three months are evaluated separately in each question. Replies are limited to "better," "same" or "worse" than a year earlier. The diffusion index is the difference between the ratio of positive ("better") and negative ("worse") responses.

Current Business Sentiment

Business sentiment among Japanese companies operating in Asia varied based on such factors as the price of materials, which have risen with oil prices. Such sentiment in ASEAN, China, and North Asia declined compared with July, and ASEAN fell back into the negative range after hitting a positive level in July. Looking at the figures by region, we see that the condition of business sentiment has remained severe in Singapore, Malaysia, the Philippines, and Taiwan since the beginning of 2005.

ASEAN 5

The August DIs declined compared with July in Thailand, Indonesia, and the Philippines, and rose in Singapore and Malaysia. There was an overall decline of 2.6 points, resulting in a negative figure for the third time this year, following March and June. Singapore's DI remained negative for the seventh month, Malaysia's for the eighth month, and the Philippines' for the fourth month, with figures staying slack. Conditions, driven by the automobile industry, had been favorable in Thailand and Indonesia, but Thailand saw a decline of 12.9 points in August, taking the DI down to the single-digit level for the first time in 20 months. Indonesia also declined, by 4.7 points, but is maintaining a two-digit level.

The outlook DIs for two to three months ahead were higher than August in Malaysia and the Philippines, and lower than August in Thailand, Singapore, and Indonesia. The figures for Singapore and Malaysia remained negative.

China and North Asia

The August DIs were lower than July in these regions except East China and Hong Kong. Even the overall figure declined by 1.4 points. The DI for Taiwan remained negative for the sixth month. East China, which had fallen into the negative range in July for the first time since these surveys began, returned to the positive range.

The outlook DIs for two to three months ahead were lower in East China and Hong Kong, but were higher than August everywhere else in these regions. The outlook DI for Taiwan remained in the negative range.

Copyright [c] 2005 JCN Newswire. All rights reserved. A division of Japan Corporate News Network K.K.