MNI BRIEF: BOJ Tankan To Show Mixed Sentiment, Solid Capex

The Bank of Japan's March Tankan survey is expected to show sentiment among manufacturers worsened slightly, but sentiment among non-manufacturers is projected to have improved, economists predicted.

Manufacturing sentiment has been weighed down by high costs and slowing overseas demand, but non-manufacturers have been encouraged by the reopening of the economy and a recovery of inbound tourism. The BOJ will release its Tankan quarterly business survey for March on April 3.

Economists expect the diffusion index (DI) for sentiment among major manufacturers to fall to +4 in March from +7 in December. The median forecast for the DI for major non-manufacturers is +20 in March, up from December’s +19. The sentiment index for small manufacturers is projected to fall to -6 from -2 in December. The sentiment for small non-manufacturers is forecast to rise to +7 from +6.

The Tankan will show that capital investment plans by major and smaller firms in fiscal 2023 are expected to be solid. Capital investment plans by major firms in fiscal 2023 are expected to rise 3.4%, higher than the 2.2% forecast for fiscal 2022 in last March's Tankan. Capex plans by smaller firms are expected to fall 11.3% vs a 11.4% fall forecast in last March's Tankan. Smaller firms' capex plans historically start the fiscal year with a negative forecast and then get revised up gradually.

BOJ officials are focused on how corporate price-setting has evolved amid a combination of high raw materials and recovering private consumption, although smaller firms are having difficulty transferring high costs to retail prices. The BOJ is watching how corporate inflation expectations are evolving amid slowing import prices and an expected rise in wages.