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REPEAT: MNI: Analysts See BOJ Dec Tankan Business Sentiment Up

Repeats Story Initially Transmitted at 09:33 GMT Dec 8/04:33 EST Dec 8
     TOKYO (MNI) - The Bank of Japan's quarterly Tankan survey for December is
expected to show sentiment among many business sectors improved slightly from
three months ago, thanks to a pickup in overseas and domestic demand amid rising
share prices, economists predicted.
     Major manufacturers are benefiting from a recovery of global demand while
non-manufacturers are hit by higher costs caused by the weak yen and a tighter
labor supply.
     Generally, firms are expected to remain cautious for the next three months
due to continued uncertainty over global growth and financial markets as well as
labor shortages.
     The BOJ will release the outcome of its latest Tankan business survey at
0850 JST on Friday, Dec. 15 (2350 GMT on Dec. 14).
     The median economist forecast for the diffusion index (DI) for sentiment
among major manufacturers is +23, up slightly from +22 in the previous survey
and marking the fifth consecutive rise.
     The forecasts from 11 economists ranged from +22 to +24.
     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
December, up from +23 in June, which would be the fourth straight quarterly
rise. The forecasts ranged from +23 to +24.
     The sentiment index for small manufacturers is projected to rise to +11 in
December from +10 in September. The index for small non-manufacturers is
forecast to edge up to +9 from +8 in September.
     Japan Research Institute said in a report that business sentiment among
major firms is supported by the weak yen, higher stock prices and a pickup in
exports in addition to record high profits at some firms.
     By contrast, smaller firms continue to suffer from the recent rise in labor
costs, restricting the improvement of their business sentiment, economists said.
     The Economy Watchers' Survey for November released Friday by the Cabinet
Office showed that while retailers and restaurants welcomed recent gians in
per-cusotmer spending, higher fuel and labor costs were squeezing profits at
some firms.
     BOJ officials expect the Tankan to show that the virtuous cycle from
profits to spending remains intact.
     The officials expect exports to continue supporting Japan's modest economic
recovery in the October-December quarter but they are also cautiously watching
whether the recent weakness in imports suggests a slowdown in domestic demand.
     The BOJ's real import index based on trade data released by the Ministry of
Finance gained 1.7% on month in October after falling 3.8% in September. The
October index was still 0.7% below the average of July-September.
     However, the concern over weak imports has been somewhat eased by a 22.2%
year-on-year rise in imports in the first 20 days of November, as seen in the
Ministry of Finance trade statistics. Imports rose 18.9% on year in October
following a 12.1% gain in September.
     To assess the strength of exports, BOJ officials look at the real export
index, which posted a 2.6% month-on-month rise in October, recovering about half
of the 5.4% drop in September.
     Exports for the first 20 days of November rose 15.0% on year, following
gains of 14.0% in October and 14.1% in September.
     Despite the slow start to consumer spending in the October-December
quarter, BOJ officials believe consumption will rebound in Q4 GDP data after a
slump in the previous three months caused by bad weather.
     The BOJ's supply-side Consumption Activity Index posted only a small
rebound in October, up a real 0.3% on the month on a seasonally adjusted basis.
It was the first rise since July, after falling 0.1% in September and dropping
0.7% in August.
     BOJ officials believe the weakness in October was mainly caused by a
temporary factor in the auto industry. New car sales fell following suspension
of production and shipments by Nissan Motor resulting from its below-standard
vehicle inspection scandal. But national sales of new vehicles, including mini
vehicles, posted the second straight year-on-year drop in November.
     The BOJ said that private consumption "has increased its resilience" in
light of improving employment and income conditions.
     Revised Q3 GDP data showed business investment was solid in the
July-September quarter. Capex grew 1.1% on quarter, or an annualized +4.3%,
marking the fourth consecutive quarter-on-quarter rise.
     The December Tankan is projected to show capex remains solid.
     The median economist forecast for fiscal 2017 capital investment plans
among major firms is +7.2%, down slightly from +7.7% in the September Tankan.
     Capital investment plans by major firms tend to be revised down in December
from September.
     The median forecast for capex plans among smaller firms is -9.25%, up from
-14.1% in the September survey.
     Capital investment plans by small businesses are conservative at the
beginning of fiscal year. They are revised up gradually toward the end of the
fiscal year.
     The BOJ board will analyze economic and financial conditions based on the
Tankan and other indicators ahead of its next policy meeting on December 20-21.
     BOJ official are also focused on the corporate inflation outlook, which is
part of the December Tankan survey but will be released later, on Monday, Dec.
18.
     In the September Tankan survey, companies on average revised down their
expectations for the consumer price index one year ahead from the previous
Tankan survey, but left their inflation outlook for three and five years ahead
unchanged from June.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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