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MNI: BOJ Tankan Expected To Show Downbeat Manufacturing-Survey

TOKYO (MNI)

The Bank of Japan's June Tankan survey will show that sentiment among smaller and major manufacturers is expected to have worsened in the wake of high commodity input costs, economists predicted.

(See: MNI DATA SURVEY: BOJ June Tankan Business Sentiment).

The Tankan, however, will likely show the improvement of smaller and major non-manufacturers in the wake of recovery of services consumption after the government lifted quasi-emergency pandemic measures in mid-March.

Economists expect the diffusion index (DI) for sentiment among major manufacturers to fall to +12 from +14 in March for the second straight drop. Forecasts ranged from +10 to +16. The median forecast for the DI for major non-manufacturers is +14 in June, up from March’s +9 and marking the first rise in two quarters. The forecasts ranged from +12 to +19.

The sentiment index for small manufacturers is projected to fall to -7 in June from March’s -4. The sentiment for small non-manufacturers is forecast to rise to -2 from -6.

The Tankan will show that capital investment plans by major firms are expected to be revised up to +8.7% from +2.2% from three months ago, indicating that demand a virtuous cycle continues working. Capex plans by smaller firms are expected to narrow from a negative number to -6.8% from -11.4% .

BOJ officials are also focused on how corporate price-setting has evolved amid a combination of high raw material costs and recovering private consumption, although smaller firms are having difficulty of transferring high costs to retail prices, (See: MNI STATE OF PLAY: BOJ's Kuroda Makes It Clear On Yen, Yields).

The BOJ is also focused on whether inflation expectations held by businesses have been rising up.

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

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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