MNI ANALYSTS: BOJ Tankan To See Modest Slip In Biz Sentiment

     TOKYO (MNI) - The Bank of Japan's September quarterly Tankan survey will

see a modest dip in sentiment across many business sectors from three months

ago, hit by natural disasters at home and uncertainties over the global economy,

economists forecast.

     Looking ahead, companies are expected to remain cautious, with U.S. trade

disputes making global growth uncertain.

     --MAJOR MANUFACTURERS FLAT

     The median forecast for the diffusion index (DI) for sentiment among major

manufacturers is +21, unchanged from June, coming after two straight quarterly

declines. The forecasts from eight economists .

     Economists, whose forecasts ranged from +19 to +23, said that companies

continue to be suffering from high energy and labor costs.

     The median forecast for the DI for major non-manufacturers is +22 in

September, down from +24 in June. The forecasts ranged from +22 to +24.

     The sentiment index for small manufacturers is projected at +13 in

September, down from +14 in the previous survey. The sentiment for small

non-manufacturers is also forecast to slip, down to +6 from +8.

     The diffusion index is calculated by subtracting the percentage of

companies reporting deteriorating business conditions from those reporting an

improvement. A positive figure indicates the majority of firms see better

business conditions.

     --TRADE, DISASTERS

     SMBC Nikko Securities' chief market economist Yoshimasa Maruyama said in a

report that corporate profits are good but business sentiment has been hurt by

natural disasters as well as concern over the impact of trade disputes.

     Economic growth is expected to stall temporarily for the July-September

quarter due to the heavy rainfall and the Hokkaido earthquake.

     Some economists said that business sentiment among major manufacturers

improved as the yen was below the average exchange rate of Y107.26 predicted in

the June Tankan.

     BOJ officials are closely watching if capital investment plans remain firm

amid uncertainties over global demand.

     --SOLID CAPEX PLANS

     Economists expect plans for business investment to remain solid on the back

of high corporate profits and the continued labor shortage. The median economist

forecast for fiscal 2018 capital investment plans among major firms is +14.2% on

year, up from +13.6% in June.

     The forecast for capex plans among smaller firms is -5.4%, up from -11.8%

in June. Capex plans by small businesses at the beginning of fiscal year usually

starts low, before being revised up gradually toward year end.

     --INFLATION FORECASTS EYED

     BOJ officials are focused on corporate inflation forecasts, part of the

September Tankan survey, but released a day later. Inflation expectations have

stopped falling but, as yet, they have not shown clear signs of a pickup in the

face of weak consumer prices.

     In the June survey, companies on average saw a slightly faster pace of

increase in consumer prices for one year ahead, compared to the previous survey,

while leaving their inflation forecasts for three and five years ahead

unchanged.

     Firms on average expect annual consumer inflation at 0.9% a year from now,

up from 0.8% in March. But companies expect a 1.1% rise for both three and five

years ahead, unchanged from March.

     The BOJ will publish its Tankan quarterly business survey for September

conducted from late August to late September at 0850 JST on Monday, October 1

(2350GMT on September 30). The corporate inflation forecasts will be published

on October 2.

--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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