Dampened business sentiment in the Bank of Japan's latest Tankan survey has been linked to factors including the sharp depreciation of the yen, which has pushed up the prices of imports, leading to soaring material costs.
The upward pressure on costs is also beginning to affect the nonmanufacturing sector and consumer spending. Price hikes -- driven by supply shortages due to Russia's invasion of Ukraine -- have been spreading beyond crude oil to textiles and food.
Firms did not expect a more than 20 yen depreciation against the dollar in the first six months of the year, according to the quarterly Tankan survey for the three months to June, which was released on Friday. Companies expected the yen to trade at 118.96 yen to the dollar, about 20 yen stronger than the current exchange rate.
