MNI DATA PREVIEW: BOJ Tankan To Show Better Business Sentiment

The Bank of Japan's December Tankan survey will show improving sentiment among many businesses compared to three months ago as exports and production have recovered from their second-quarter declines, but readings will stay low and companies are likely to keep their cautious outlook, economists forecast.

While major firms are expected to revise down their capital investment plans due to heightened uncertainty following resurgent virus infections at home and abroad, the focus will be on how the revisions deviate from the historical average.

The BOJ will release the outcome of its latest Tankan quarterly survey conducted from early November to Dec. 11 at 0850 JST on Dec. 14 (2350 GMT on Dec. 13. Sunday).

CAPEX

Economists expect the diffusion index (DI) for sentiment among major manufacturers at -17, up from -27 in September for the second straight rise, aided by the recovery in exports and industrial output. Forecasts ranged from -7 to -21.

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 conditions.

The median DI forecast for major non-manufacturers is -6 in December, up from -12 in September. The forecasts ranged from -3 to -9.

The sentiment index for small manufacturers is projected to improve to -37 in December from -44 in the previous survey. The sentiment for small non-manufacturers is also forecast to rise to -19 from -22.

Capital investment plans by major firms are expected to be revised down to -0.1% from +1.4% made in September, indicating a fiscal year decline.

Smaller firms will likely revise their capex plans upwards to -14.1% from -16.1% in the September Tankan after they gave a weak forecast at the beginning of the fiscal year.