The latest Reuters corporate survey found that nearly half of Japanese firms believe the conflict in Israel between the IDF and Hamas militants in the Gaza Strip could potentially impact their earnings, primarily through increases in the price of oil or other commodities
Meanwhile, with regard to ending negative interest rates, which the Japanese central bank has relied upon as the foundation of its accommodative monetary policy, almost half of Japanese companies predict it will happen by the middle of next year.
The poll also found that forty-eight percent of the companies which were polled by Reuters said the conflict in Israel between the IDF and Hamas militants in the Gaza Strip would have a negative effect on their earnings. That is roughly equal to the 49 percent who said they saw no impact, and far outweighed the three percent who predicted it would have a positive effect on their earnings.
One manager at a chemical manufacturer said in his survey, “Worsening of the Middle East situation will lead to a sharp rise in raw material and fuel prices.”
Firms which made predictions in the survey as to how high oil prices might rise in the near future included 46% which said they expected to see prices increase to $120 per barrel or higher. Presently North Sea Brent crude is priced at about $81 per barrel.
With regard to concerns in the Middle East, roughly two-thirds of those who responded were concerned about the increase in the prices of raw materials other than oil. About half of those respondents said they were concerned there would be an increase in global inflation, and two-fifths predicted there would be potential shortages of oil products, and materials made from them.
Forty-six percent of companies said they expected to see negative interest rates brought to an end by the Bank of Japan (BoJ) by June of 2024 or before.
Last week, the BoJ watered down a 1% cap for the 10-year yield by citing it as a reference, rather than a hard ceiling, easing its hold on long-term rates.
Sources say the bank will next bring its negative interest rate policy to an end, driving short-term rates, which presently sit at -0.1%, to zero.
Forty percent of companies in the survey said their companies’ management was benefitting from the negative interest rate policy.
The monthly Reuters Corporate Survey was conducted for Reuters by Nikkei Research on Oct. 24-Nov. 2. It queried 502 large and mid-sized non-financial Japanese firms, of which 251 responded. Firms responded on condition of anonymity, which allowed them to speak freely.
