MNI DATA IMPACT: BOJ June Tankan: Sentiment Falls, Capex Mixed

     TOKYO (MNI) - Japanese business sentiment worsened from three months ago,

as expected, as uncertainties and lower corporate profits triggered by the

spread of the coronavirus weighed on the outlook, the Bank of Japan's June

Tankan Business Survey shows.

     But many firms, especially the larger ones, expect sentiment to improve

three months ahead as economic activities restart as restrictions ease, the

survey published Wednesday shows.

     The Tankan also showed capital investment plans by major and smaller firms

were revised down and now sit below the historical averages.

     The key points from the survey:

     --The diffusion index for sentiment among major manufacturers stood at -34

in June, down from -8 in March, the sixth straight drop, now at the lowest level

since June 2009 when it was -48. It was below the MNI survey median forecast of

-31.

     The index is projected to improve to -27 in September.

     --The 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 major non-manufacturers fell to -17 in June from

+8 last quarter, a fourth straight drop, hitting the lowest level since December

2009 when it was -22. The index is projected to improve to -14 three months

ahead.

     --A BOJ official said that business sentiment was by-and-large hit by the

fall in exports and consumer spending as the coronavirus spread.

     --The sentiment index for smaller manufactures fell to -45 in June from -15

in March (the MNI survey median forecast was -40) -- the lowest level since

September 2009 when it was -52. The index is expected to worsen to -47 in

September. The sentiment index for smaller non-manufacturers stood at -26 in

June, down from -1 in March to the lowest level since June 2011 when it was -26.

It is projected to worsen to -33.

     --Business investment plans by major firms in fiscal 2020, key to a pickup

in domestic demand, are projected to rise 3.2% on year, revised up from +1.8% in

the March Tankan. Capex plans by smaller firms are expected to fall 16.5% in

fiscal 2020, revised down from -11.7% in the March Tankan and below the MNI

median forecast of -16.2%.

     --The average dollar/yen exchange rate assumed by major manufacturers for

fiscal 2020 was JPY107.87, compared with JPY107.98 in the March.

     --The average euro/yen exchange rate assumed by major manufacturers for

fiscal 2020 was JPY119.74, compared with JPY120.29.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MAJDS$,M$A$$$,M$J$$$]