MNI: BOJ March Tankan To Show Weaker Sentiment, Solid Capex

The Bank of Japan's March Tankan survey due April 1 will show a temporary worsening of major business sentiment over the quarter, but small- and major-firm capital investment plans are expected to remain solid, economists told MNI.

Economists expect the diffusion index (DI) –calculated by subtracting the percentage of companies reporting deteriorating business conditions from those reporting an improvement – for major manufacturers to fall to +10 in March from +13 in December. A positive figure indicates the majority of firms see better conditions ahead.

Economists predict the median DI for major non-manufacturers will land at 33 in March, up from 32 in December, while the sentiment index for small manufacturers will likely fall to -1 from +2. The sentiment for small non-manufacturers is forecast to rise to 15 from 12.

SOLID CAPEX

The Tankan will show major- and smaller-firm capex plans this fiscal year will likely rise 10.0%, slightly revised down from December's 13.2%, however, the downward revision is in line with seasonal patterns. Economists expect smaller firm capex plans to rise 8.8% from 8.3%.

Major-firm capex plans in fiscal 2024 will likely rise 2.9% while smaller firms will see a 2.4% fall, the economists predicted.

BOJ officials are focused on how inflation expectations held by businesses, which have been rising but far from the bank's 2% target, are evolving amid the fall in import prices.

The Bank's board on Tuesday terminated its negative interest rate and yield curve control programme as the BOJ expects the economy to achieve its 2% price target toward the end of the projection period. (See MNI BOJ WATCH: Ueda Says Rate Path Will Depend On Prices)

The BOJ will release its next Tankan quarterly business survey conducted between early February to March 29 at 0850 JST on April 1 (2350 GMT on March 31).