MNI DATA PREVIEW: BOJ Tankan To Show Dip In Business Sentiment

     TOKYO (MNI) - The Bank of Japan's September Tankan survey will likely see a

dip in corporate sentiment from the June reading, as weaker exports due to

ongoing global trade disputes and the slowing global economy weigh on the

outlook.

     Capital investment plans by the major companies will be revised slightly

lower for their plans of three months ago, although those at smaller firms will

be revised higher.

     The September quarter Tankan business survey, due on October 1, is expected

to show the diffusion index for the major manufacturers at +2, down from +7 in

June, recording a third consecutive decline.

     The major non-manufacturers DI is seen falling to +21 in September, down

from +23 in June. The small manufacturers DI is projected to be -6 in September,

down from -1 in the previous survey, while sentiment for small non-manufacturers

is also forecast to slip to +8 from +10.

     Major manufacturers are feeling the impact of the drop of exports, while

non-manufacturers continue to suffer from labor shortages, although seeing the

benefit of strong demand from foreign visitors alongside domestic private

demand. However, economists point to the likelihood of a further dip in Q4

following the October sales tax hike.

     The diffusion index is calculated by subtracting the percentage of

companies reporting deteriorating business conditions from those reporting an

improvement, with a positive figure indicating better business conditions.

     Japan's economy grew at a slower pace than initially estimated in Q2, with

business investment weaker than first estimated. The economy rose 0.3% q/q, or

an annualized 1.3%, helped by strong private consumption and public investment,

revised down from the preliminary estimate of +0.4% and1.8% respectively.

     --SOLID CAPEX PLANS

     Capital investment plans by major firms are likely to be revised modestly

lower from three months ago, with capex plans by smaller firms likely to be

revised up. Demand for capex for R&D and to cope with the lack of labor, both

not directly linked to the slowdown in overseas economies, remains solid.

     However, the slowdown in overseas economies is certainly making some firms

more nervous about their investment plans, with some considering a postponement

until the global outlook is clearer.

     The median forecast for FY19 capital investment plans among major firms is

+6.9% y/y, down from +7.4% in the June Tankan, as historically plans are little

revised in September from the June reading.

     The forecast for capex plans among smaller firms is -5.8%, up from -9.3% in

the June, following the patter of upward revision as the year unfolds.

     --INFLATION OUTLOOK

     The BOJ will await the corporate inflation forecasts, part of the September

Tankan survey but published a day later.

     expectations have stopped falling but there has been no clear evidence of a

pickup in the face of weak consumer prices. The June survey saw a slightly

slower pace of increase in consumer prices for three years ahead, compared to

the previous survey, while leaving their inflation forecasts for one and five

years forward 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

[TOPICS: M$A$$$,M$J$$$]