Japanese CEOs are more pessimistic about the economy, exercising caution leading up to upcoming wage increases.

According to a recent survey conducted by Nikkei, optimism among Japan’s corporate heads is on the decline. In the survey, only 50% of respondents believed that the economy is “expanding” or “expanding slightly”, a sharp decrease from the previous quarter where 72% were positive about the economy. This is the lowest reading since the March 2022 poll, which only had 13.1% of respondents feeling optimistic.

Additionally, 45% of respondents in the survey said they believe the economy will remain flat, a significant increase from the 20% in the previous poll. The reasons for this shift in sentiment included 80.3% of respondents blaming flat consumer spending, 40.9% citing stagnation in China, and 37.9% pointing to persistent labor shortages.

The Nikkei survey is conducted quarterly and provides insights into the sentiment of Japan’s corporate leaders. The Summary of the March BIOJ meeting also indicated a slow rate cycle ahead, further reinforcing the downward trend in optimism about the economy.