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MNI DATA BRIEF: BOJ Tankan: Manufacturers Upbeat, But Services Struggle

Big manufacturer sentiment recovers to pre-COVID-19 levels

(MNI) Tokyo

Big manufacturers in Japan turned upbeat in the past three months, thanks to an economic recovery that boosted production and exports, but face-to-face services slowed as COVID-19 restrictions hit, the Bank of Japan's June Tankan business sentiment survey published Thursday showed.

Business sentiment among major manufacturers recovered to pre-COVID-19 levels.

But sentiment among non-manufacturers remained severe as the service sector struggles with a state of emergency to combat the pandemic. A pickup is unlikely in July with the already delayed Summer Olympics set for a truncated event.


The diffusion index for sentiment among major manufacturers stood at +14 in June, up from +5 in March, registering a fourth straight rise, although the median forecast was +15. The index is projected to fall to +13 in September.

June's +14 is the highest level since December 2018. The sentiment index for smaller manufactures rose to -7 in June from -13 in March, also the fourth straight rise. The index is expected to improve to -6 in September.

The sentiment index for smaller non-manufacturers stood at -9 in June, up from -11 in March, and is projected to worsen to -12 in September.

The sentiment index for major non-manufacturers rose to +1 in June from -1, the fourth straight rise. The index is projected to rise to +3 three months ahead.

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 Tankan also showed capital investment plans by both major and smaller firms this fiscal year above the historical average.

Business investment plans by major firms in fiscal 2021, key to a pickup in domestic demand, are projected to rise 9.6% on year, compared with +3.0% in March, while capex plans of smaller firms are expected to rise 0.9% this fiscal year, compared with -5.5% in the previous survey.

MNI Tokyo Bureau | +81 90-2175-0040 |
MNI Tokyo Bureau | +81 90-2175-0040 |

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