MNI: DATA PREVIEW: BOJ Tankan To Show Business Sentiment Slip

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

likely show a slight dip in sentiment across many business sectors from three

months ago, hit by the uncertainties over the global economy, economists

forecast.

     Looking ahead, companies are expected to remain cautious, as trade friction

casts a shadow over global growth.

     The BOJ will release the outcome of its Tankan quarterly business survey

for December conducted from mid-November to Dec. 13 at 0850JST on Friday, Dec.

14 (2350GMT on Dec. 13).

     --MAJOR MANUFACTURERS SLIP

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

among major manufacturers is seen at +18, down from +19 in September, for the

fourth straight quarterly decline. The forecasts from eight economists ranged

from +13 to +21.

     Economists said that companies are hit by uncertainties over global demand

caused by the U.S.-China trade friction and the slowing Chinese economy.

     Meanwhile, firms are benefiting from the improvement of the term of trade

caused by the drop in crude oil prices.

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

December, I changed from +22 in September. The forecasts ranged from +20 to +23.

The sentiment index for small manufacturers is projected to be +13 in December,

down from +14 in the previous survey. The sentiment for small non-manufacturers

is also forecast to slip to +9 from +10.

     The economy is returning to a moderate recovery path in the fourth quarter

after a temporary dip caused by a string of natural disasters.

     BOJ officials are closely watching how capital investment plans have

evolved amid the uncertainties over global demand to gauge the virtuous cycle

from profits to spending.

     --SOLID CAPEX PLANS

     Economists expect plans for business investment to remain solid on the back

of high corporate profits and the continued labor shortage.

     The median economist forecast for fiscal 2018 capital investment plans

among major firms is +12.4% on year, down from +13.4% in September. Capital

investment plans by major firms tend to be slightly revised down in December

from September.

     The forecast for capex plans among smaller firms is -3.7%, up from -8.4% in

September. Capex plans by small businesses at the beginning of fiscal year is

low and they are usually revised up gradually toward the end of fiscal year.

     --INFLATION FORECASTS EYED

     BOJ official are focused on corporate inflation forecasts, which are part

of the December Tankan survey but will be released on Dec. 17.

     Inflation expectations have stopped falling but they have not shown clear

signs of a pickup in the face of weak consumer prices.

     In the September survey, companies on average saw a slightly slower pace of

increase in consumer prices for one year ahead, compared to the previous survey,

while leaving their inflation forecasts for three and five years ahead

unchanged.

     Firms on average expect the annual consumer inflation rate at 0.8% a year

from now, down from 0.9% in June. But companies expect a 1.1% rise for both

three and five years ahead, unchanged from June.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

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