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Half of Japanese firms see earnings risks from Israel-Hamas conflict: Reuters poll

TOKYO : Almost half of Japanese companies see the conflict between Israel and Palestinian militants Hamas potentially hitting their earnings, citing concerns about a further rise in oil and commodity prices, the latest Reuters corporate survey showed.

On the issue of ending negative interest rates, which have been a key pillar of Japan’s central bank’s accommodative monetary policy, nearly half of Japanese firms said they expected it to happen by the middle of next year.

Forty-eight percent of firms polled by Reuters said the Israel-Hamas conflict would affect their earnings negatively, the poll showed, roughly on par with the 49 per cent who expected no particular impact and outstripping the 3 per cent who saw a positive effect.

“Worsening of the Middle East situation will lead to a sharp rise in raw material and fuel prices,” a manager at a chemical manufacturer wrote in the survey.

In the survey, 46 per cent of firms that responded to a question about how much oil prices are likely to rise in the near future said they expected them to increase to $120 a barrel or higher. North Sea Brent crude is now around $81 a barrel.

The poll highlighted wider worries about conditions in the Middle East. Among concerns about instability in the Middle East, two-thirds of respondents cited rises in raw material prices other than oil.

About half of them said they feared more global inflation, while two-fifths saw potential shortages of oil products and those made of them, according to the survey.

The monthly Reuters Corporate Survey of 502 large and mid-sized non-financial Japanese firms, in which 251 responded, showed 46 per cent of companies expected the Bank of Japan (BOJ) to end negative interest rates by the June 2024 quarter or earlier.

The BOJ last week eased its hold on long-term rates by watering down a 1 per cent cap set for the 10-year yield as a reference rather a rigid ceiling.

Sources have said its next focus is to end its negative interest rate policy and push short-term rates to zero, from the current -0.1 per cent.

In the survey, 40 per cent of firms said the negative interest rate policy was having a positive impact on their companies’ management.

The survey was conducted for Reuters by Nikkei Research on Oct. 24-Nov. 2, with firms responding on condition of anonymity to allow them to speak more freely.

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