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     TOKYO (MNI) - The Bank of Japan's Tankan survey in March is expected to
show business sentiment in many sectors largely flat from three months earlier,
hit by the yen's rise, high materials costs and the cold weather, economists
     They also expect business investment to be solid, backed by firmer global
and domestic demand.
     The BOJ will release the outcome of its quarterly Tankan business survey
for March at 0850 JST on Monday, April 2 (2350 GMT on April 1).
     On March 2, the BOJ said it had made slight revisions to previous Tankan
figures after conducting a routine shuffling of sample firms, which takes place
every few years, as well as introducing a new sampling method based on sales,
instead of the number of employees.
     Major manufacturers are benefiting from firmer global demand for
automobiles, electronics and machines but the recent appreciation of the yen
will trim exporter profits. Non-manufacturers are weighed down by rising costs
in light of higher energy prices and labor shortages.
     Demand for winter clothing and heaters was solid in the first quarter but
freezing temperatures lingered across most of Japan, discouraging people from
going shopping and dampening demand for spring clothing. Heavy snowfalls
disrupted traffic and caused casualties in some regions.
     Looking three months ahead, companies are likely to remain cautious about
their business prospects as the concerns over the yen and persisting high costs
     The MNI median economist forecast for the diffusion index (DI) for
sentiment among major manufacturers in March is +26, up from +25 in December
under the previous survey formula, but unchanged from +26 under the new formula.
The forecasts from 10 economists ranged from +24 to +27.
     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.
     The median forecast for the DI for major non-manufacturers is +24 in March,
up from +23 in December in the previous method but down from +25 with the new
samples. The forecasts ranged from +23 to +26.
     The sentiment index for small manufacturers is forecast to be +14 in March,
down slightly from an unrevised +15 in December. The sentiment for small
non-manufacturers is also expected to slip to +8 from an unrevised +9.
     Despite forecasts for flat business sentiment, BOJ officials believe the
virtuous circle from higher corporate profits and investment to firmer income
gains and household spending remains intact.
     They are closely monitoring whether smaller firms will follow the lead of
major firms in raising wages and whether the moderate increase in average total
wages, estimated under 3% on year for fiscal 2018, will stimulate private
consumption and allow more firms to raise retail prices.
     Economists expect business investment plans in fiscal 2018 to be solid on
the back of solid overseas and domestic demand.
     The median forecast by nine economists for fiscal 2018 capital investment
plans among major firms -- the first forecast -- is +0.6% (forecasts ranged from
+5.2% to -0.4%). It is the same rate of increase planned by major firms for
their fiscal 2017 capex found in the March 2017 Tankan survey.
     The median economist forecast for capex plans among smaller firms is -19.4%
for fiscal 2018 starting in April (forecasts ranged from -15.5% to -22.0%),
firmer than -22.6% planned for fiscal 2017 seen in the March 2017 Tankan.
     Capital investment plans by small businesses at the beginning of every
fiscal year is low and they tend to be revised up gradually toward the end of
fiscal year.
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: