MNI: BOJ Tankan Sees Key Sentiment Rise, Solid Capex Plans
MNI (TOKYO) - Japanese benchmark business sentiment remained unchanged over Q3, despite sentiment among major non-manufacturers posting its first rise in two quarters, the Bank of Japan’s September Tankan business sentiment survey released Tuesday showed.
The Tankan results revealed capital investment plans by major firms and smaller firms this fiscal year remained firm and above historical averages, supporting the BOJ's view the virtuous cycle from income to spending continued to work. (See MNI POLICY: BOJ Hikes To Weather Weaker Consumption)
A BOJ official told reporters a combination of sluggish overseas demand and a peal-out of cost increases continued to weigh on major manufacturer sentiment.
The diffusion index for sentiment among major manufacturers stood at +13 in September, unchanged from +13 in June, but higher than the market's expected +12. The index is likely to rise to 14 in December.
The sentiment index for major non-manufacturers rose to +34 in September from +33 in June, for the first rise in two quarters and the highest level since March 2024. The index is projected to fall to +28 in Q4.
The Tankan 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 sentiment index for smaller manufactures stood at zero in September, up from -1 in June, for the first rise in three quarters. The index is expected to remain flat in December.
The official said the ongoing pass-through of cost increases drove the improved sentiment.
The sentiment index for smaller non-manufacturers stood at +14 in September, up from +12 in June, for the first rise in three quarters and for the highest level since December 2023. The DI is projected to fall to +11 in December.
Cost increases and labour cost rises have hurt small non-manufacturers, the BOJ official added.
Business investment plans by major firms this fiscal year, key to a pickup in domestic demand, are projected to rise 10.6% y/y, above the historical average.
Capex plans of smaller firms are expected to rise 2.6% this fiscal year, also above the historical average. Capex plans by smaller firms tend to be revised up after the negative forecast at the beginning of the fiscal year.