Japanese business sentiment improved in November, but the economic recovery is uneven

　　Sentiment among large manufacturers in Japan (JPN) improved for the first time since August and sentiment in the services sector rose for a second straight month, the Tankan survey showed, but it also highlighted an uneven recovery and a challenging outlook.

　　The monthly survey follows a similar improvement in the third quarter in the Bank of Japan's closely watched quarterly Tankan survey.

　　However, the latest tankan survey showed that despite a pick-up in business sentiment in November, the economic situation in the coming quarter remained grim, with manufacturers' confidence holding steady over the next three months and sentiment in the services sector expected to deteriorate.

　　The survey surveyed 502 large and medium-sized businesses, half of which responded anonymously. In the report, many companies complained of higher import costs for raw materials and deterioration in the key market of Japan.

　　The weak yen, which raises the price of imported goods, has been the main driver of cost of living pressures; Slow global growth, sharply higher interest rates abroad and geopolitical tensions pushing up commodity prices are also holding back the overall economy.

　　The survey, conducted between October 24 and November 2, showed the manufacturers' sentiment index at positive 6 in November, up 2 points from October, led by auto and food processing companies. The index is expected to be flat in February.

　　The services index rose to plus 27 in November from plus 24 in October, led by retailers, information and communications, and other services. The services index is expected to fall to plus 21 in February, a bad omen for domestic consumption. Japan ended coronavirus quarantine measures earlier this year, but domestic consumption has yet to pick up.

　　Data on Tuesday showed Japanese consumer spending fell for a seventh straight month in September, suggesting a recovery in household consumption will take time. A separate survey showed analysts expect Japan's economy to contract in the third quarter, the first contraction in four quarters.