According to a Reuters poll released on Friday, Japanese manufacturers' confidence rose to a more than two-year high in April, as good demand in the electronics industry and favorable exchange rate conditions improved export chances. According to the Reuters Tankan poll, which monitors the Bank of Japan's (BOJ) closely watched tankan quarterly study, service sector producers were also slightly less negative than the previous month.

Manufacturers, expressed concern about the global economic outlook and listed difficulties obtaining materials for manufacturing, indicating that Japan's recovery from the coronavirus crisis is still uneven.

According to a Reuters poll released on Friday, Japan's exports grew at their fastest rate in far more than three years in March as the overseas market recovered, but more disturbances from the coronavirus crisis continued to stifle growth. Improved production and exports have boosted the recovery in the world's third-largest economy, but sluggish vaccine deployments and a rebound of COVID-19 cases are tainting the forecast for consumption. Many businesses are afraid to spend due to concerns about the fourth wave of COVID-19 events.

“The semiconductor market is improving, but leading to a sudden rise in demand, constraints for obtaining resources are stiff,” a manager at a machinery manufacturer said. Electronic part manufacturers have benefited as the pandemic fueled demand for specialized chips and other products to power smartphones and laptops, leading to a global chip scarcity.

The Reuters Tankan sentiment index for producers increased to 13 from 6 the previous month, reaching its highest level since February 2019, according to the survey conducted from April 2 to 13.

According to a poll of 482 large and mid-sized businesses, the service sector index stayed in a downturn for the 14th month in a row, increasing to minus 3 from minus 5 in March. 243 firms replied on the speaking anonymously. The readings of the Reuters Tankan index are calculated by subtracting the percentage of respondents who claim circumstances are bad from those who say situations are fine. Pessimists outnumber optimists in a gloomy reading.

“While the coronavirus appears to affect, our profits are projected to improve as a result of cost reduction,” a steel company manager wrote in the survey. Big manufacturers' morale strengthened to pre-pandemic levels in the first quarter, according to the BOJ's first-quarter tankan survey data, as companies increased capital spending plans. The central bank will conduct its next rate review on April 26-27, after easing its grip on long-term interest rates moderately last month and laying the foundation for cutting its huge asset purchases. Others in the Reuters Tankan survey said the market operation was being hampered by difficulties obtaining key production items, such as raw materials and intermediate goods.

Some other manager at an electric machinery manufacturer said his business earnings were down due to a lack of production materials.

The survey found that manufacturers' business trust remained stable at 13 in July, while service-sector firms' confidence was expected to rise to 2. Core consumer inflation, which is expected to decline for the eighth consecutive month as price pressures stayed steady due to weak consumer spending, will be released next week.

According to a poll of 16 economists, exports increased by 11.6 % in March compared to the same month last year, the largest increase since January 2018. Imports were expected to rise 4.7 % year over year in March, resulting in a trade surplus of 490.0 billion yen ($4.5 billion). In the first quarter of last year, Japan's economy was seriously impacted by a global trade disruption caused by the pandemic, and the country experienced a recession for the first time in four and a half years.

“Exports are supposed to turn favorable again compared to a year ago,” said Kenta Maruyama, an economist at Mitsubishi UFJ Research and Consulting. “They started to deteriorate greatly in March last year due to the impact of the coronavirus,” he added.

“While the growing trend in capital and information-related products persists, it is slowing slightly.”

According to the Reuters survey, the core consumer price index (CPI), which includes oil products but removes erratic fresh food prices, fell 0.1 % in March compared to the same month a year ago.