Most private think tanks in a recent survey expect the Bank of Japan’s next “tankan” report to show improved business sentiment among large manufacturers for the third straight quarter.
Fifteen of the 17 think tanks canvassed predict the headline diffusion index for large manufacturers will improve in the tankan, while the other two expect it to remain flat. The index represents the percentage of companies experiencing positive business conditions minus those that are not.
The BOJ will release the closely watched survey next Tuesday. After examining the results, Prime Minister Shinzo Abe plans to make a final decision on whether to proceed with the planned consumption tax increase to 8 percent next April 2014 from the current 5 percent to cover spiralling welfare expenditures.
The average estimate for the headline diffusion index among the 17 think tanks stood at plus 7, three points higher than in the June tankan. Many of the institutes forecast improvement, noting a recovery in corporate earnings has grown clearer than in the previous three months.
As Tokyo won the right to host the 2020 Summer Olympics during the tankan survey period, Takeshi Minami, chief economist at Norinchukin Research Institute, said hopes for boosted infrastructure projects may have had a favorable impact on business sentiment among real estate companies.
Regarding capital spending plans by large companies across all industries in fiscal 2013, which ends next March, the 17 think tanks on average projected a 6.0 percent increase from the previous year, against the 5.5 percent rise in the June tankan.