Free Trial

MNI: Key Sentiment, Capex Plans Solid - BOJ Tankan

MNI POLICY: Weaker Yen To Raise Pressure On BOJ To Move On YCC
MNI: BOJ Tankan To Show Steady Sentiment, Solid Capex Plans
(MNI) TOKYO

Japanese benchmark business sentiment rose over Q4 for the third straight increase thanks to the recovery of automobile production due to eased supply-side restrictions and despite global economic uncertainty, the Bank of Japan's December Tankan business sentiment survey showed on Wednesday.

The diffusion index for sentiment among major manufacturers stood at +12 in December, up from +9 in September – the highest level since March 2022. It is expected to fall to +8 in March in line with its typical pattern.

Business sentiment among major non-manufacturers stood at +30 in December, up from +27 in September, the seventh straight rise and the highest level since November 1991. It is projected to fall to +24 in March. A positive figure indicates the majority of firms see better business conditions.

The sentiment index for smaller manufactures stood at +1 in December, up from September’s -5 and the highest level since March 2019. The index is expected to fall to -1 in March.

The sentiment index for smaller non-manufacturers stood at +14 in December, up from +12 in September, the seventh straight rise and the highest level since August 1991, showing firms continued to pass on high costs to retail prices. It is projected to fall to +7 in March.

CAPEX REMAINS STRONG

Capital investment plans remained firm, supporting the BOJ view that the virtuous cycle between income and spending continued, although implementation remained weak, the December Tankan results showed.

Major-firm business investment plans this fiscal year – key to a pickup in domestic demand – will rise 13.5% y/y, revised down from September's +13.4% projection, and in line with the typical upward revision pattern. Smaller firm capex plans will likely rise 10.3% revised from +8.0% in September, also in line with the typical pattern.

The revised capex plans by major and smaller firms were far above historical average – a closely watched BOJ metric. However, a gap exists between the implementation of capex on a real basis in gross domestic product and plans on a nominal basis in the Tankan.

High costs and labour shortages prompted firms to postpone capex, slowing implementation. GDP data showed capex fell 0.4% q/q in Q3, the second straight drop following -1.3% in Q2.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.