MNI DATA PREVIEW: BOJ Tankan To Show Business Sentiment Slump

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

show a big drop in sentiment among many business sectors compared to the

previous period, weighed by the spreading coronavirus and sluggish domestic

demand, economists said.

     The Tankan will show major firms have revised down their capital investment

plans, although smaller firms have revised their plans higher, which is a normal

pattern.

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

for March conducted from mid-February to March 31 at 0850 JST on April 1, (2350

GMT on March 31).

     --BUSINESS SENTIMENT SLUMPS

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

among major manufacturers is -11, down from zero in December, for a fifth

straight drop. The forecasts from eight economists ranged from -7 to -14.

     Both manufacturers and non-manufacturers were strongly hit by weak overseas

and domestic demand caused by the spread of the virus, economists suggest.

     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 +2 in March,

down from +20 in December. The forecasts ranged from +12 to -6.

     The sentiment index for small manufacturers is projected to be -21 in

March, down from -9 in the previous survey. The sentiment for small

non-manufacturers is also forecast to slip to -9 from +7.

     --CAPEX REVISED DOWN

     Capital investment plans by major companies are likely to be revised

slightly down from three months ago and the focus is on how the revised capex is

above the historical average level. Plans by smaller firms, as normal pattern,

are likely to be revised up from three months ago.

     The median economist forecast for fiscal 2019 capital investment plans

among major firms is +4.2% on year, down from +6.8% in the December Tankan.

     Capital investment plans by major firms in every March Tankan are usually

revised down from the three months ago ahead of March 31, the end of fiscal

year.

     The forecast for capex plans in fiscal 2019 among smaller firms is -1.0%,

up from -2.2% in the December Tankan.

     Capital investment plans in fiscal 2020 by major firms are expected to fall

1.8%, compared with +1.2% in fiscal 2019 plans in the March Tankan 2019.

     Economists see business sentiment worsening further three months ahead as

the global economy will continue to be weighed down by the spread of the

coronavirus will continue.

     --INFLATION FORECASTS EYED

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

part of the March Tankan survey, have been affected by the drop in crude oil

prices and weak global demand.

     The BOJ slightly lowered its assessment of inflation view, saying,

"Inflation expectations have been more or less unchanged from a somewhat

longer-term perspective, but somewhat weak indicators have been observed

recently."

     The previous view was "Inflation expectations have been more or less

unchanged."

--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

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