MNI DATA IMPACT: BOJ Tankan: Biz Mid-Term CPI Outlook Down

     TOKYO (MNI) - Japanese companies are anticipating lower inflation in the

medium term while maintaining the same short and long term expectations as they

did three months ago, according to the Bank of Japan's quarterly Tankan survey

for June.

     The inflation outlook follows Monday's main Tankan release, and suggests

that a pickup in consumer prices will remain slow.

     The Tankan showed that business sentiment, particularly among

manufacturers, fell broadly from three months ago as sentiment was hit by

China's slowing economy and the intensified trade tensions.

     The survey also showed capital investment plans by both large and small

firms in this fiscal year were above historical averages, easing BOJ concern

that the cycle from profits to business spending will stall.

     The survey, published Monday, was conducted from May 28 to June 28.

     The key points from the inflation outlook section of the Tankan follow.

     --In the June survey, companies saw a slightly slower pace of increase in

consumer prices over the next three years, while leaving their inflation

forecasts for one and five years ahead unchanged.

     --Firms on average expect an annual consumer inflation rate of 0.9% a year

from now, which is unchanged from March. Companies also expect a 1.1% rise over

five years, also unchanged from March. But the June survey showed they expect

three year inflation to reach 1.0% in June, down from 1.1% in March.

     --The survey results should prompt the BOJ board to maintain the current

view that inflation expectations are largely unchanged.

     --Many companies -- 31% of those polled vs 32% in March -- expect the

inflation rate to be at 1% in 12 months. The survey showed that 14% of all firms

(13% previously) projected 2% inflation a year ahead while 32% (32% three months

earlier) saw a flat inflation rate during the same period.

     --Smaller firms continued to project higher inflation expectations than

larger corporations, as they tend to be hit harder by rising costs and the

tighter labor supply.

     --The survey showed companies on average expect sales prices to rise 0.7% a

year from now, down from 0.8% in March. They saw an increase of 1.2% three years

ahead, unchanged from March and left their five-year sales price forecast at

1.5%. 

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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