MNI: BOJ Sept Tankan To Show Sentiment Muted In Key Businesses

The Bank of Japan's September Tankan survey will show that sentiment among major manufacturers remains muted from three months ago amid the spread of Delta variants of the coronavirus and supply chain disruptions, economists predict.

Some economists see a worsening of sentiment among major manufacturers, which would mark the first time in five quarters if that occurs.

Business sentiment among smaller firms is expected to have worsened from three months ago as they are hard hit by the state of emergency measures to curb the spread of Covid-19.

However, business sentiment is expected to improve three months ahead due to the progress of vaccination rates and hopes for reopening businesses, see: MNI STATE OF PLAY: BOJ Policy Meeting To Mull Downside Risks.

The Tankan will show that capital investment plans by major companies are expected to be revised down from three months ago. But the downward revision in September from June is a normal pattern.

Capex plans by smaller firms are expected to be revised up from three months ago and it is also a normal pattern.

The BOJ will release the outcome of its Tankan quarterly business survey for September conducted from early August to September 30 at 0850 JST on Oct. 1, Friday (2350 GMT on Sept. 30, Thursday).

BOJ officials are focused on how corporate price-setting has evolved amid a combination of high raw materials and a weak consumer price index.

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Economists expect the diffusion index (DI) for sentiment among major manufacturers to improve to +15 from +14 in June for the fifth straight rise. Forecasts ranged from +10 to +17.

The diffusion index is calculated by subtracting the percentage of companies reporting deteriorating business conditions from those reporting an improvement. A positive figure indicates most firms see better business conditions.

The median forecast for the DI for major non-manufacturers is +1 in September, unchanged from June's +1. The forecasts ranged from -1 to +2.

The sentiment index for small manufacturers is projected to fall to -8 in September from -7 in the previous survey. The sentiment for small non-manufacturers is forecast to fall to -11 from -9.

Capital investment plans by major companies are likely to be revised down from three months, which is a normal pattern. Unless capex plans were revised down sharply, BOJ officials will maintain that a virtuous cycle from profit to spending continues working.

Capital investment plans by major firms will be revised down to +9.0% from +9.6% made in June.

Smaller firms will likely be revised higher as capex plans by smaller firms usually tend to be revised up after forecasting weak capex plans at the beginning of fiscal year.

Capex plans by smaller firms are expected to be revised up to +1.4% from +0.9% in the June Tankan.