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MNI: BOJ Tankan To Show Sentiment Little Changed; Solid Capex

(MNI) TOKYO

The Bank of Japan's June Tankan survey will show little change among major business sentiment over the past three months, while small- and major-firms' capital investment plans will remain solid, economists told MNI.

The lack of key business sentiment improvement caused by the temporary suspension of automobile production will not impede a rate hike as early as the July policy meeting, the economists predicted.

BOJ officials will focus on branch-manager meetings on July 8 to gauge wage hikes at smaller firms and the impact of the weak yen on corporate price-setting behavior. (See MNI POLICY: BOJ Concern Grows Over Yen Impact On Wages, Prices) They are also focused on how inflation expectations held by businesses, which are rising, have evolved amid slowing price hikes and weak private consumption.

Economists expect the diffusion index (DI) for sentiment among major manufacturers to print at +11 in June, unchanged from March. Forecasts ranged from +9 to +13.

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.

The median forecast for the DI for major non-manufacturers is +33 in June, down from +34 in March. Forecasts ranged from +32 to +36.

The sentiment index for small manufacturers is projected to have fallen to -2 from -1 in March. The sentiment for small non-manufacturers is forecast to fall to +12 from +13.

CAPEX PLANS

The Tankan will show that capital investment plans by major and smaller firms this fiscal year are expected to rise 14.2%, revised up from 4.0% in March, the economists predicted, noting the upward revision is a typical pattern.

Capex plans by smaller firms are expected to rise 0.3%, also revised up from -3.6% in March. Capex plans remain solid but implementation has been delayed due to labour shortages.

The BOJ will release the outcome of its Tankan quarterly business survey conducted from early May to June 28 at 0850 JST on July 1, Monday (2350 GMT on June 30, Sunday).

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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