MNI INSIGHT: BOJ Reservations Over Tankan Capex Revisions

By Hiroshi Inoue

     TOKYO (MNI) - Less than a week ahead of the key Tankan report, Bank of

Japan economists are concerned that the capital investment plans outlined in the

survey of the main manufacturers will not reflect current uncertainty in the

global economy as capex intentions are usually only revised after the Sep 30

half-year end, MNI understands.

     Even then plans historically tend to be only modestly revised from the June

reading and there is a worry the latest read will not capture a true reflection

of where capex stands.

     The June survey showed that major firms expected capital investment to rise

7.4% on year and the latest MNI median forecast for the September survey sees

only a modest fall to 6.9%.

     The bank economists hope the Tankan survey will give them a gauge of any

worsening of corporate sentiment, particularly if slowing capex plans look like

undermining the sustainability of the virtuous cycle between profits and

consumption.

     --KURODA FOCUS

     Governor Haruhiko Kuroda on Tuesday pointed to two key factors that the BOJ

is focussed on at present; the timing of a pick-up in overseas economies and

whether the strength in domestic demand can be sustained until that global

recovery occurs.

     "The sustainability of domestic demand depends on business fixed

investment," Kuroda said, noting that the longer the global slowdown lasted, the

greater the need to pay close attention to the capital investment plans of

firms, particularly in the manufacturing sector.

     BOJ economists will also eye the diffusion index of excess demand minus

excess supply to see whether it continues to slide after touching -7 in June and

-5 in March.

     The next BOJ meeting is scheduled for Oct 30-31, when policymakers will

review their medium-term outlook for economic growth and inflation rates.

--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: MMJBJI,MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$,MX$$$$]