Trial now



Japan May CPI 0.1% Y/Y; Energy Up


EDM5 Given

     TOKYO (MNI) - The Bank of Japan's June quarter Tankan survey, due July 1,
will show a drop in sentiment among many business sectors from three months ago,
as trade friction and heightened uncertainties over the global outlook continue
to weigh, economists said.
     The Tankan will show that both major and smaller companies revised capital
investment plans higher, although implementation may be delayed.
     The median economist forecast for the diffusion index (DI) for sentiment
among major manufacturers is +10, down from +12 in March, for the second
straight drop, with forecasts ranging from +7 to +11.
     Economists said that companies, especially major manufacturers, are seeing
lower exports caused by the slowing Chinese economy and weak capital investment
     Non-manufacturers continue to suffer from labor shortages, although they
were benefiting solid demand by foreign visitors.
     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 +20 in June,
down from +21 in March. The forecasts ranged from +19 to +22.
     The sentiment index for small manufacturers is projected to be +4 in June,
down from +6 in the previous survey. The sentiment for small non-manufacturers
is also forecast to slip to +11 from +12.
     Japan's economy grew at a faster pace than initially estimated in the
January-March quarter, with business investment stronger than initially seen.
     The economy rose 0.6% on quarter, or an annualized 2.2%, in Q1 thanks to
stronger capital investment and positive contribution from net exports, revised
from +0.5% on quarter, or an annualized +2.1%.
     The upward revision came mainly from higher capital investment, revised up
to a 0.3% gain (the MNI median forecast was +0.5%) from a preliminary -0.3%
following. There was a 2.7% gain in Q4.
     But the economy seems to be slowing in the second quarter in the wake of
weak exports and industrial production.
     Capital investment plans by both major and smaller firms are likely to be
revised up from three months ago and will be closely watched by the BOJ. The
median economist forecast for major firms is +9.3% on year, up from +1.2 in the
March Tankan.
     The forecast for capex plans among smaller firms is -9.5%, up from -14.9%
in March.
     BOJ officials are focused on corporate inflation forecasts, which are part
of the June Tankan survey but will be released on July 2.
     In the March survey, companies on average saw the inflation rate for one
and three years ahead unchanged from three months ago, while slightly lowering
their inflation outlook for five years ahead.
     Firms on average expect an annual consumer inflation rate at 0.9% a year
from now, unchanged from 0.9% in December. Companies also expect a 1.1% rise
three years out, also unchanged from December. But they expect five years ahead
numbers to fall to 1.1% in March from 1.2% in December.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: MAJDS$,M$A$$$,M$J$$$]
MNI London Bureau | +44 203-865-3812 |