MNI 5 THINGS: BOJ Dec Tankan: Sentiment Unchanged, Capex Solid

     TOKYO (MNI) - The Bank of Japan's quarterly Tankan business survey for

December, released Friday, showed business sentiment was unchanged from three

months ago, indicating that the impact of global trade friction on businesses

has been limited.

     However, looking ahead, sentiment among major companies is expected to

worsen on concerns over the impact of the trade friction and uncertainties over

overseas demand. Labor shortages in Japan are also pushing up costs.

     On the plus side, business investment plans remain solid for fiscal 2018,

as many firms are seeking to ease production capacity constraints, as they

absorb high costs through increased productivity.

     Capital investment plans by major firms are above the historical average. A

BOJ official said, "Firms were hit by slowing overseas demand" but the real

impact on businesses was limited. Firms are also suffering from a labor shortage

and uncertainties over the global economy, he said.

     The average dollar/yen exchange rate assumed by major manufacturers for

fiscal 2018 (beginning Apr 1) was Y109.41, compared with Y107.40 seen in the

September survey.

     The diffusion index is calculated by subtracting the percentage of

companies reporting deteriorating business conditions from the percentage of

those reporting an improvement. A positive figure indicates the majority of

firms see better business conditions.

     The key points from the survey:

     - The diffusion index for sentiment among major manufacturers stood at +19,

unchanged from +19 in September, indicating that they are hit by uncertainties

over global demand but the impact was limited.

     The index was slightly stronger than the MNI survey median forecast of +18.

The index is projected to worsen to +15 in March.

     -- The sentiment index for major non-manufacturers marked the first

improvement in two quarters, rising to +24 in December from +22 in September, in

light of the recovery of services and sales after the temporary dip caused by a

string of natural disasters in the third quarter.

     It was above with the MNI survey median forecast for +22. The index is

projected to fall to +20 three months ahead.

     -- The December sentiment index for smaller manufactures was unchanged from

September +14 (the MNI survey median forecast was +13). The index is expected to

slip to +8 in March. The sentiment index for smaller non-manufacturers stood at

+11 in December, up from +10 in September. The index is projected to slump to +5

in the next poll.

     -- Business investment plans by major firms, the key to a pickup in

domestic demand, are projected to rise 14.3% on year in the current fiscal year,

slightly revised up from +13.4% seen in the September survey and above the MNI

survey median economist forecast for a 12.4% rise. Capex plans by smaller firms

are expected to fall 3.7% in fiscal 2018, revised up from -8.4% in September and

was in line with the MNI survey median forecast of -3.7%.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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