Yen Looks Through Mixed Q1 Tankan Report

USDJPY has looked through the mixed Q1 BoJ Tankan report. The pair had been trending higher before the report and is currently around 151.29, slightly down on the day. Firms expect it to strengthen to 141.4 in FY24. Large manufacturers’ sentiment remains optimistic but fell 1 point to 11 with the outlook at 10, the first drop in a year which was likely due to the impact from an earthquake on NY’s Day and some industrial scandals. Non-manufacturers rose 4 points to 34 though, but is expected to moderate in Q2 to 27.

• Companies expect inflation to moderate further over the coming year to 2.4% from the 2.8% recorded in February. Then to 2.2% in 3 years and 2.1% in 5 years.
• Large company capex plans for FY24 are expected to rise only 4% down from 13.5% last quarter, while small firms expect it to contract by 3.6%.
• The financial conditions index was unchanged at +11.
• Finance minister Suzuki has commented on the importance of stable FX moves and reiterated that the ministry will respond appropriately but continued not to comment on levels. While USDJPY remains above 150, officials are likely to continue trying to talk it down.