— Fixes 6th Paragraph To Say ‘Not Fully Reflected’ Instead of ‘Fully Reflected’

TOKYO (MNI) – The Bank of Japan’s Tankan survey will show that sentiment
among major manufacturers will post the third straight quarterly fall in
December, hit by depressed exports and consumption, according to the median
forecast of economists polled by MNI.

The BOJ will release the outcome of its December Tankan quarterly business
survey at 0850 JST on Friday, Dec. 14 (2350 GMT Thursday).

The headline diffusion index (DI) is forecast to slump to -10 in December
from -3 in September and -1 in June and post the worst figure since -14 in March
2010.

The BOJ’s October real export index fell 2.9% on the month at 108.2 (100
for the 2010 base year), the lowest since 106.9 in April 2011. It was the sixth
straight monthly fall after -3.5% in September.

Private consumption, the largest component of GDP, has been dampened as the
government ended its subsidies for buying low-emission vehicles in September.

Moreover, the negative impact of violent anti-Japanese protests in China in
September and ensuing boycotts of Japanese products and cancellations of visits
to Japan, which was not fully reflected in the September Tankan, will also weigh
on sentiment in the December survey, economists said.

Looking ahead, economists believe the March DI will improve only slightly
to -9, thanks to an expected pickup in industrial output and a softer yen.

A survey by the Ministry of Economy, Trade and Industry has shown that
industrial production, a coincident indicator of the economy, is expected to
rise 0.8% q/q in Q4, posting the first rise in three quarters.

In addition, the yen has been weaker, with dollar/yen stable above Y82.
Japan’s major manufacturers have made their business plans on the assumption
that the dollar will average Y78.95 in the current fiscal year to March 31,
according to the September Tankan.

A dollar rise by Y10 would raise Japan’s real GDP by 0.19 percentage point
in a 12-month period, according to the Cabinet Office.

Economists expect the major non-manufacturers’ sentiment index to slip to
+5 in December from +8 in both September and June.

The December Tankan is also forecast to show that capital investment plans
by major firms in fiscal 2012 will rise 5.0% on year, revised down from +6.4%
projected in September.

Meanwhile, the December survey is expected to indicate that capex plans by
smaller firms for fiscal 2012 will be revised up to +2.9% y/y from no change in
the September Tankan.

Small businesses tend to revise up their business investment plans
gradually as the fiscal year progresses.

The BOJ appears to be conducting its latest Tankan survey through Dec. 13,
with 70% to 80% of surveyed firms responding by the BOJ’s suggested date of Nov.
28.

–MNI Tokyo Bureau; tel: +81 90-4818-1387; email: skodama@mni-news.com
–MNI Tokyo Bureau; tel: +81 90-4670-5309; email: msato@mni-news.com

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