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MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - The Bank of Japan is confident a sharp downward revision in
capital investment plans won't be highlighted in the June Tankan survey, despite
slower global growth and a re-escalation of the U.S./China trade dispute, MNI
     The central bank sees corporate plans as a key gauge of how the economy
will perform in coming months after decelerating in the first quarter as
production slowed and hope the next survey, due to be published on July 1, will
show a continuation of the virtuous cycle from corporate profits to spending.
     Plans by major manufacturers, dependent on global demand, will be weighed
down by uncertainties, but non-manufacturers, where investment is not directly
linked to the wider world, will likely remain solid, the BOJ feels, as companies
continue to seek solutions to labour shortages. Alongside that, a boost in R&D
spending will also help.
     Despite the expectation of the strong spending by non-manufacturers, the
BOJ hasn't ruled out the risk that such plans could be dented by a prolonged
global slowdown.
     The BOJ will not conduct additional easy policy bases on lower capex plans
alone, even if the come in below historical averages. Instead, they are likely
to await hard data rather than rely on surveys alone.
     The March Tankan showed capex plans were above average levels across the
board, whilst still highlighting concerns over China's slowing economy and the
dip in global demand. The BOJ hopes China's recent stimulus measures will be
effective but are aware there are certainly concerns as to how, when and to what
extent the impact will be felt.
     Major firms intend to increase investment by 1.2% in FY2019, below the 2.3%
rise outlined in the March '18 Tankan. Plans laid out by smaller firms show
investment down 14.9%, beating the MNI median forecast of -19.8% and the initial
plans of -16.8% last March. Smaller firms' capex plans tend to be revised higher
towards the end of the year.
     The BOJ is cautious, noting that the ratio is at a level near the highs
observed in the investment cycles after the burst of the bubble, suggesting
cyclical adjustments will likely slow capex spending ahead.
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |