— See Separate Table For Details Of Individual Forecasts

TOKYO (MNI) – The Bank of Japan’s Tankan quarterly survey will show
that the current sentiment among major manufacturers will post the first
improvement in two quarters after being unchanged in March, according to
the median forecast of economists polled by MNI.

The BOJ will release the outcome of its June Tankan survey at 0850
JST on Monday, July 2 (2350 GMT Sunday).

The headline diffusion index (DI) is forecast to rise to -3 in June
from -4 in the previous survey in March. It would be the highest level
since +2 marked in September 2011.

The diffusion index is calculated by subtracting the percentage of
companies reporting deteriorating business conditions from the
percentage of those reporting an improvement. A positive figure
indicates the majority of firms see better business conditions.

Many economists said sentiment among manufacturers is being
supported by the government’s subsidies for buying low-emission
vehicles, demand for rebuilding the earthquake-hit northeastern region
and lower energy costs.

But they added that an improvement will be limited in the face of
the drag from the relatively strong yen on exports, slower growth among
emerging economies and the uncertainty about the European debt crisis.

Looking ahead, economists said the headline index will be unchanged
in September from June.

The Tankan’s major manufacturer index bottomed out at -58 in March
2009 following the collapse of Lehman Brothers in September 2008.

Economists expect the major non-manufacturers’ index to rise to +7
in June from +5 in March, which would be the highest level since +10 in
June 2008.

The index is expected to fall to +6 in September.

The DI for small manufacturers is forecast to have fallen to -11 in
June from -10 in March while the index for small non-manufacturers is
estimated at -9 in June, up from -11 in March.

The June Tankan is also projected to show that capital investment
plans by major firms in fiscal 2012 will rise 3.4% on year, revised up
from being unchanged in March.

Capital investment plans are usually revised up in June from March
as many firms have only temporary capex plans for the coming fiscal year
that starts on April 1.

In the June Tankan, capex plans by small firms for fiscal 2012 are
expected to show a 10.6% decline, up from an estimated 12.9% drop seen
in the March Tankan.

Small firms 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
June 29, with 70% to 80% of surveyed firms responding by the BOJ’s
suggested date of June 12.

skodama@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4838 **

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