Industry & Manufacturing Conditions Rebound In Q2

Japan's Q2 BSI all industry conditions rebounded to +2.7 from -3.0 in Q1. This is the highest level since Q4 2021 for the print. The manufacturing reading also rose back to -0.4 from -10.5. The non-manufacturing side also saw improvement to 4.1 from 0.6 in Q1. All sectors expect a further improvement in conditions as we progress through 2023, although medium sized firms remain more optimistic compared to smaller firms.

• Dometic economic conditions also improved across the various sectors for Q2 versus Q1 reads, although the outlook is more mixed.
• These readings are consistent with positive business investment revisions from the Q1 GDP report. They are also encouraging from a broader economic outlook, although don't form a key part of the BoJ outlook around wages/inflation.
• The market reaction post the data has been limited. USD/JPY is holding under 139.50, while JGB futures are slightly lower (last 148.19).