BOJ ‘tankan’ to show downturn in biz sentiment


Private think tanks expect the Bank of Japan’s “tankan” quarterly survey to June will show a deterioration in business sentiment among large manufacturers for the first time in six quarters.

Among 16 think tanks, the average estimate on the headline diffusion index for large manufacturers’ current business conditions stands at plus 15, compared with plus 17 in the March survey.

Their projections reflect a fall in demand following a rush of last-minute purchases to beat the consumption tax hike on April 1, as well as sluggish exports.

The diffusion index represents the percentage of companies seeing positive business conditions minus those experiencing negative sentiment. The BOJ is due to announce the results of the June tankan on July 1.

Of the 16 think tanks surveyed, 10 project a deterioration in the headline index, due chiefly to worsened sentiment in the automotive sector, which enjoyed brisk last-minute demand through the end of March.

All forecast that the diffusion index for large nonmanufacturers, including retailers, will deteriorate. But the size of decline is largely expected to be limited.

“Business sentiment has been solid following the tax hike,” said Ryutaro Kono, chief economist at BNP Paribas Securities (Japan) Ltd.

The average estimate on the business condition outlook diffusion index for large manufacturers toward September stands at plus 17, with most of the think tanks projecting an improvement.

They expect capital spending at large manufacturers and nonmanufacturers will rise by an average of 6.0 percent in fiscal 2014 over the previous year, substantially better than the 0.1 percent rise in the March survey.