TOKYO - Japanese factory managers' morale inched higher in May as some materials industries rebounded from a sharp drop linked to the Iran war. But the overall recovery is lukewarm, with critical sectors like autos seeing confidence halve.
The Reuters Tankan poll shows manufacturers' sentiment edged up to plus 8 from plus 7 in April - still well below the four-year high of plus 18 seen in March.
Materials industries swung back into positive territory. Chemicals recovered to plus 6 from minus 8, while steel and nonferrous metals climbed to zero from minus 25.
A chemicals executive attributed the improvement to "front-loaded demand due to the Middle East situation."
But the transport machinery sector - including Japan's major automakers - saw its index halve to plus 10 from plus 20, extending a sharp decline from March's plus 36. One manager cited supply constraints tied to the Strait of Hormuz.
Food processors remained the weakest manufacturing segment, falling to minus 40 - a six-year low.
Some factories also flagged the weak yen as pushing up raw material costs.
Looking ahead, manufacturers expect further weakening, with the index forecast to fall to plus 5 by August.
Non-manufacturers slipped to plus 29 from plus 31 in April. Real estate, construction, and general services all dropped. Wholesalers soured, while retailers grew more optimistic.
A transport company noted "soaring crude prices and shortages... have created some pull-forward demand, but we anticipate further supply tightness."
The May 1-15 poll surveyed 492 major non-financial firms, with 220 responding.