— See Separate Table For Details Of Individual Forecasts

TOKYO (MNI) – The Bank of Japan’s Tankan quarterly survey gauging
business sentiment among major Japanese manufacturers will show the
first fall in two quarters in December, according to the median forecast
of economists surveyed by Market News International.

The BOJ will release the outcome of its December Tankan survey at
0850 JST on Thursday, Dec. 15 (2350 GMT Wednesday).

The headline diffusion index (DI) is forecast to fall to -2 in
December from +2 in the previous survey in September. The forecast level
for the December survey would be the lowest since -9 marked in June.

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 the global slowdown amid the European debt
crisis, the persistent strong yen and supply chain restrictions in
flood-hit Thailand hurt sentiment among major manufacturers.

Meanwhile, economists expect the major non-manufacturers’ index to
remain unchanged at +1 in December.

Looking ahead, economists expect the major manufacturer DI to
worsen to -3 in March 2012, saying the global economic outlook remains
uncertain.

The DI for small manufacturers is seen deteriorating to -15 in
December from -11 in September while the sentiment index for small
non-manufacturers is expected to drop to -20 in December from -19 in
September.

The December Tankan is also expected to show that capital
investment plans by major firms in fiscal 2011 will rise 2.5% on year,
down from a 3.0% rise projected in the September Tankan.

Weaker capex plans were already signalled by the Japanese
government’s quarterly survey conducted on Nov. 15 and released on Dec.
9, which showed companies expect their combined capital spending to rise
only 0.7% on year in fiscal 2011, revised down from +5.4% projected
three months earlier.

In the December Tankan, capex plans by small firms in fiscal 2011
are expected to show a 13.8% y/y decline, improving from -17.7% seen in
the September Tankan.

Small firms tend to revise up their capital investment plans
gradually as the fiscal year progresses.

The BOJ is expected to have conducted its latest Tankan survey up
to Dec. 14, with 70% to 80% of surveyed firms responding by the BOJ’s
suggested date of Nov. 29.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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