Bank of Japan's tankan survey likely to show big manufacturers' mood at 6½-year low

Big manufacturers’ confidence is likely to have hit a 6½-year low in the September quarter, a Reuters poll has found, as the U.S.-China trade war and weakening global demand hit the business mood.

The Bank of Japan’s quarterly tankan business sentiment survey is projected to show the headline index for big manufacturers’ confidence fell to plus 2 in September from plus 7 three months earlier, the poll of 12 economists found.

It would be the third straight quarterly deterioration and the lowest value since March 2013, when the index showed minus 8.

That also means the index likely fell to the lowest since the BOJ, under Gov. Haruhiko Kuroda, started its superloose monetary policy in April 2013.

The sentiment index for big nonmanufacturers also likely worsened to plus 20 in September from the plus 23 seen in the June survey, the poll showed.

“The intensified U.S.-China trade friction, slowdown in overseas economies and yen’s appreciation hit firms’ business sentiment,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.

In the December quarter, big manufacturers’ business confidence is expected to worsen to plus 1, and nonmanufacturers’ sentiment is also seen falling to plus 16, the poll found.

Big companies are projected to raise capital expenditure plans by 7.0 percent for this fiscal year to March 2020, slightly down from 7.4 percent projected in the June survey.

“A deterioration in the export environment and concerns over the economic outlook after a sales tax hike in October, big companies are expected to downgrade their capex plans,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Kuroda signaled on Thursday a readiness to ease monetary policy further, vowing to guide policy appropriately “without any preset conditions in mind.”

The BOJ will publish its tankan survey at 8:50 a.m. on Tuesday.

Meanwhile, factory output in August likely slipped 0.5 percent from the previous month, due to weak exports to Asian nations, after a 1.3 percent gain in July, another poll of 16 economists showed.

The trade ministry will announce the factory output on Monday.

Retail sales data, also released Monday, was expected to show 0.9 percent growth in August from a year earlier, after a 2 percent fall in July, the poll showed.

Sales of summer items, autos and home electric appliances likely contributed to the growth in retail sales, analysts said.

The poll also expected the jobless rate to have risen to 2.3 percent in August from 2.2 percent in July, and the jobs-to-applicants ratio to stand at 1.58, down from 1.59.