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MNI PREVIEW: BOJ Tankan To Show Mfg Sentiment Improvement

Benchmark Manufacturers' DI Seen At +1 Vs -10 in December

MNI (London)

The Bank of Japan's March Tankan survey will show an improvement of sentiment among manufacturers from three months ago, boosted by the ongoing recovery in bot the export and manufacturing sectors, economists predict, although business sentiment among non-manufacturers is expected to worsen as the face-to-face service sector struggles through the pandemic.

The Tankan will show major firms revising down their capital investment plans this fiscal year on the back of growing uncertainties and BOJ officials are now focused on whether capex plans in fiscal 2021 deviate from historical averages.

The BOJ will release the outcome of its Tankan quarterly business survey for March conducted from early February to March 31 at 2350 GMT on Mar 31.

Tankan Large Manufacturers Diffusion Index

Source: Bloomberg


Economists expect the diffusion index (DI) for sentiment among major manufacturers rising to +1, up from -10 in December. The median forecast for the DI for major non-manufacturers is -5 in March, unchanged from December.

The sentiment index for small manufacturers is projected to rise to -18 in March from -27 in the previous survey. The sentiment for small non-manufacturers is forecast to fall to -15 from -12.

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 business conditions.


Capital investment plans by major companies are likely to be revised slightly lower from three months, indicating a dip in capex this fiscal year drops, BOJ officials expect. Capital investment plans by major firms will be revised down to -2.2% from December's -1.2%.

Smaller firms will likely revise capex plans modestly higher, as they tend to be revised up after weaker forecasts at the beginning of fiscal year. Capex plans by smaller firms are expected to be revised to -12.1% from -13.9% in the December Tankan.

Economists expect business sentiment to improve three months ahead as economic activities resumed but a cautious view will continue amid uncertainties over the consequence of coronavirus.

MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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