(A Friday story that corrects large firms’ capital spending projections to +4.0%, from +4.4% at paragraph 8 after a contributor revised its forecast.

TOKYO, Reuters – Japan’s major manufacturers are likely to have become less optimistic over the first quarter due to supply disruptions, surging energy costs, and the deterioration of Japan’s business climate, according to a Reuters poll.

Analysts said that core consumer prices in Tokyo rose in March at the fastest rate since over two years. This was due to higher electricity and gas prices.

According to Reuters analysts, the BOJ’s “tankan”, closely watched survey will likely show that the index of big manufacturer’s sentiment dropped to plus 12, from plus 18, in the three previous months.

According to analysts from Mitsubishi UFJ Research and Consulting (NYSE:) Research and Consulting, “Companies experienced a rise of costs due to surging commodities prices and a weak yen while a parts shortage caused production cuts and pushed down business conditions.”

These data were not good news for Bank of Japan (BOJ), who warned of the risks of a fragile economic recovery following the Ukraine crisis at their March policy meeting. They also maintained the massive stimulus that they had provided on Friday.

The poll indicated that confidence among large non-manufacturers likely declined, however, it did not slip into net pessimism. It was at plus 5 in the poll, down from December’s plus 9.

Large manufacturers predicted that conditions will continue to deteriorate in the next three months. The reading dropped to +10, a sign there was growing uncertainty regarding the business outlook. However, poll results showed large non-manufacturers expecting an improvement to +8.

It is expected that the tankan will also show large firms are likely to increase their capital spending by 4.0% in the current fiscal year. This figure is less than the 9.3% rise estimated in the last poll.

On April 1st, at 08:50 local time (March 31st at 2350 GMT), the BOJ will publish results from its tankan quarterly survey.

On March 24, separate data is due to be released. It will show that Tokyo core consumer prices (which exclude fresh foods) would increase 0.7% in March compared with a year ago. This represents the fastest growth since January 2020.