Photo/Illutration A worker assembles an electric vehicle at Mitsubishi Motors Corp.’s Mizushima plant in Kurashiki, Okayama Prefecture. (Asahi Shimbun file photo)

Business confidence among large manufacturers worsened for the second consecutive quarter in June amid soaring material costs and a global supply shortage, according to the Bank of Japan's tankan quarterly survey.

The tankan survey of about 10,000 companies, released on July 1, also showed that the diffusion index among large nonmanufacturers improved for the first time in two quarters following a drop in COVID-19 cases in Japan.

The index is calculated by subtracting the percentage of companies reporting unfavorable business conditions from the percentage reporting favorable conditions.

The diffusion index for large manufacturers dropped 5 points from the previous survey in March to plus 9 since a wide range of sectors are struggling to deal with rising material costs stemming from Russia’s invasion of Ukraine.

Their businesses were also hampered by disruptions to global supply chains caused by Shanghai’s lockdown imposed to contain the novel coronavirus pandemic.

The diffusion index declined 16 points to minus 6 in the iron and steel industry, while the figure was down 6 points to minus 11 in the food sector. The index for the automobile industry dropped 4 points to minus 19.

The diffusion index for large nonmanufacturers rose 4 points to plus 13 apparently because the tourism and restaurant sectors are enjoying good business performance following the lifting of all COVID-19 pre-emergency measures nationwide in late March.

The index for the industry of amusement parks and other services jumped 32 points to plus 18, while that for the lodging and restaurant sector rose 25 points to minus 31.