MNI DATA PREVIEW: BOJ Tankan To Show Business Sentiment Dips

     TOKYO (MNI) - The Bank of Japan's quarterly Tankan survey for March will

show a drop in sentiment among many business sectors, hit by the slowing Chinese

economy and heightened uncertainty over the global demand, with the caution set

to remain in coming quarters economists forecast.

     The median economist forecast for the headline diffusion index (DI) for

sentiment among major manufacturers is +14, down from +19 in December, with

forecasts from eight economists ranging from +11 to +16.

     Companies, particularly major manufacturers, have been hit by falling

exports as China slows and capital investment levels overseas weaken.

     Non-manufacturers continue to struggle with labour shortages, although they

have seen some benefit from high numbers of overseas visitors to Japan.

     --NON-MANUFACTURERS DIP

     The median forecast for the DI for major non-manufacturers is +22 in March,

down from +24 in December. The forecasts ranged from +20 to +24.

     The sentiment index for small manufacturers is projected to be +10 in

March, down from +14 in the previous survey. The sentiment for small

non-manufacturers is also forecast to slip to +9 from +11.

     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 March conducted from mid-February to March 29 at 0850 JST on April 1, (2350

GMT on March 31).

     --CAPEX PLANS SLIP

     BOJ officials are closely watching how capital investment plans in FY2019

evolve to see if the virtuous cycle from profits to spending is intact.

Economists expect capex plans to be hit by the ongoing global uncertainty,

although solid domestic demand and labour shortages are supportive to capex.

     The median economist forecast for fiscal 2019 capital investment plans

among major firms is -0.7% on year, down from a 2.3% rise in fiscal 2018 in the

March Tankan 2018.

     Initial capital investment plans by the major firms tend to be gradually

revised up from March level, with BOJ economists usually more focused on revised

capex plans in the June Tankan. However, they will at least look for comparisons

of plans with those in previous years.

     The forecast for capex plans in fiscal 2019 among smaller firms is -19.8%,

down from a 16.8% fall in fiscal 2018 in the March Tankan 2018. 

     --INFLATION FORECASTS EYED

     BOJ official will also eye corporate inflation forecasts, which are part of

the March Tankan survey but will be released a day later on April 2. Inflation

expectations have stopped falling but they have not shown any clear signs of a

pickup in the face of weak consumer prices.

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

from now, up from 0.8% in September. Companies also expect a 1.2% rise five

years out, but they expect three year ahead numbers to be unchanged from

September.

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

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