TOKYO (MNI) – The Bank of Japan’s quarterly Tankan business survey
for September is expected to show that sentiment among major
manufacturers continued to improve but that the pace of improvement
would have slowed, economists and analysts said.
They also said corporate executives would expect their sentiment to
worsen for the next three months until December, reflecting slower
global economic growth and concern over the impact of the strong yen.
The expected improvement in sentiment at major manufacturers would
be the sixth consecutive quarter of such improvement, although many
analysts expect a smaller gain compared with three months ago.
The BOJ will release the results of the September Tankan survey at
0850 JST on Sept. 29 (2350 GMT on Sept. 28).
The benchmark diffusion index by major manufacturers is expected to
have improved to +6 from +1 in the June Tankan survey, improving for the
sixth consecutive quarter, according to forecasts by economists.
The forecasts for the DI range from +3 to +8.
But economists and analysts expect the benchmark DI to worsen to a
range of between -5 and +6 by early December.
It would be the first time since December 2008 that company
executives have expected the DI in the next three months to worsen.
Economists expect the slowing pace of growth in exports and
industrial production to have prevented business sentiment from picking
up faster.
They also said the strong yen and a slowdown of the domestic
economy expected in the fourth quarter prompted business managers to be
more cautious about conditions in the next three months.
BNP Paribas chief economist Ryutaro Kono said that the key focus is
on how seriously the yen’s appreciation since June has affected
corporate sentiment and business plans.
He added that the strong yen seems to have somewhat squeezed
corporate profits and negatively affected capital spending plans.
Nikko Cordial Securities chief market economist Mari Iwashita said
that attention should be paid to the assumed dollar-yen exchange rate in
the September survey, compared with an average Y90.18 presumed by major
manufacturers in the previous Tankan.
She added that if the yen is forecast by firms to be around Y80 to
the dollar, capital spending in Japan would be restrained and thus would
not play a major role in supporting continued economic recovery in the
coming months.
Mitsubishi UFJ Morgan Stanley Securities expects the September
Tankan to show that the DI at major manufacturers was boosted by higher
corporate profits.
The expected improvement of the DI is believed to have been
supported by solid economic data during the period.
Japan’s trade surplus more than doubled from a year earlier in
July, up 119.9% at Y804.20 billion, the 14th consecutive month that the
surplus has exceeded the year-ago level, but the on-year pace of export
growth decelerated for the fifth month in a row.
Japan has posted a trade surplus for 16 months in a row, with the
country’s last deficit, of Y5.41 billion, recorded in March 2009.
Japanese industrial production rose 1.5% from the previous quarter
in the April-June period. The growth pace slowed from the 7.0% rise in
the first quarter but increased for the fifth consecutive quarter.
BOJ officials are focused on whether capital spending plans will be
revised up from the previous survey, although capital spending plans in
September surveys have a tendency not to fluctuate sharply from June
surveys.
Economists expected capital spending plans by major manufacturers,
the prime engine for a sustainable economic recovery, to have been
revised up slightly from the previous quarter.
The quarterly business survey by the Ministry of Finance released
on June 15 showed that capital spending by all firms is likely to rise
9.2% on the year, sharply improving from a 5.7% fall in the prior survey
for the January-March period.
Meanwhile, the Tankan diffusion index for major non-manufacturers
is expected to have improved to -2 from -5 in the previous Tankan.
The forecasts for the DI range between -1 and -3.
The Tankan results are likely to prompt BOJ officials to hold the
view that Japan’s economy should stay on a recovery trend but that the
pace of economic growth would slow in the coming months.
If the Tankan results indeed show an improvement in corporate
sentiment and firms’ business plans, it would reduce the need for the
BOJ to conduct additional credit easing.
The forecasts for the DI by major and smaller firms
Major companies Smaller Companies
Manufacturers Non- Manufacturers Non-
Manufacturers Manufacturers
Mizuho Securities +8 -2 -13 -24
Nomura Securities +8 -3 -16 -23
Mitsubishi Research
Institute: +8 -2 -12 -24
Mitsubishi UFJ Morgan
Stanley Securities:+8 -1 -13 -24
Fujitsu Research +7 -1 -13 -24
BNP Paribas: +7 -1 -14 -23
JP Morgan +7 -2 -14 -24
Mitsubishi UFJ Research:+6 -2 -14 -24
Citigroup +6 -1 -14 -23
Nikko Cordial +5 -2 -18 -28
Daiwa Institute Of Research:+5 -1 -16 -23
Sumitomo
Mitsui Asset Management:+4 -2 -20 -27
Dai-Ichi Life Research
Institute: +3 -3 -14 -25
————————————————————————
Median: +6 -2 -16 -25
————————————————————————
BOJ June Tankan Results +1 -5 -18 -26
-26
————————————————————————
BOJ June Tankan Forecasts for September DI
+3 -4 -19 -29
tokyo@marketnews.com
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