— Corrects 1st Paragraph to Say 1st First Decline in 3 Quarters, Adds
Details

TOKYO (MNI) – The Bank of Japan’s quarterly Tankan survey released
on Monday showed that business confidence among large manufacturers
marked the first decline in three quarters in September from three
months ago and it is projected to show no improvement in December.

Sentiment among non-manufacturers, both big and small, was
unchanged from June, but they expect worse business conditions ahead.

The Tankan survey headline index — showing current business
sentiment among large manufacturers — fell to -3 in September from -1
in June, led by a slump felt by steel mills and carmakers.

The benchmark figure came slightly better than the median forecast
for -4 in an MNI survey, with economists’ projections ranging from -1 to
-6.

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.

Sentiment slipped amid the global economic slowdown caused by the
European debt crisis.

Large manufacturers polled in the latest survey expect their
sentiment index to be unchanged at -3 in December.

The Tankan results are consistent with the outcome of the latest
government survey.

The Economy Watchers’ Survey index for Japan’s current economic
climate marked the first drop in two months in August as subsidy-backed
car sales have slowed and the global slowdown is hurting business
sentiment.

The current conditions index fell to 43.6 in August from 44.2 in
July. It remained the lowest level since May 2011, when it stood at 36.0
in the aftermath of the devastating earthquake that year.

The forward-looking index fell for the four straight month on
concerns that confidence may be dampened by the government’s plan to
double the 5% sales tax by 2015 and car sales will see a pullback after
the government ends its reward program for buying greener vehicles.

In the September Tankan, the assumed dollar-yen exchange rate
expected by major manufacturers this fiscal year is Y79.06, compared
with Y78.95 in the previous survey.

Business confidence among large non-manufacturers stood at +8 in
September, unchanged from three months ago. The construction industry
has been backed by fiscal programs to rebuild the earthquake-hit
northeastern areas while retailers reported slower business.

The index is expected to fall to +5 in December.

The sentiment index for small manufacturers dropped to -14 from -12
in June and is expected to fall further to -16 in December.

The index for smaller non-manufacturers was unchanged from three
months ago at -9 but is forecast to worsen to -16 in December amid
concern over slowing domestic demand.

The Tankan also showed that capital investment plans by major
manufacturers in fiscal 2012 are expected to rise 12.3% from a year
earlier, little changed from +12.4% in June.

All major firms, including non-manufacturers, expect their capital
spending to rise 6.4% from a year earlier in the current fiscal year,
also little changed from +6.2% in the June Tankan.

Business investment plans by all industries for the current fiscal
year are projected to rise 5.8%, revised up from a 4.0% rise seen in the
previous survey.

Small businesses forecast their capex will be flat from a year
earlier, also better than a 6.6% fall expected in June.

The Tankan showed that combined sales among all sectors in the
current fiscal year are estimated to rise 1.7% from a year earlier,
weaker than a 2.2% rise recorded in fiscal 2011.

Meanwhile, firms expect their combined current profits to rise 0.8%
this fiscal year, up from a 3.2% fall seen in the previous year.

Large companies are forecasting their profits to be flat on year,
up from a 9.1% fall in the last fiscal year.

Smaller firms expect their current profits to rise 4.9% for this
fiscal year, down a 12.7% rise seen in the last fiscal year.

In the September survey, sentiment among automakers worsened from
three months ago but sentiment among electronics firms and business
machinery makers slightly improved.

Large carmakers, whose sentiment worsened to +19 in September from
+32 in June, expect their index to slump 24 points to -5 in December.

In December 2011, the government revived subsidies for buying
low-emission vehicles, but the program was finished in September as its
budget ran out.

Sentiment among large electric machinery makers rose to -13 in the
latest survey from -14 in June and they expect the index to improve
further to -7 in three months.

In the latest survey, 10,722 firms, or 99.1%, responded, compared
with 10,894 firms or 98.6%, in the June survey.

The September survey was conducted from Aug. 28 to Sept. 28, with
slightly under 70% of the surveyed firms responding by the BOJ’s
suggested date of Sept. 11.

This means that the negative impact of violent anti-Japanese
protests in some Chinese cities over bilateral territorial disputes,
which wrecked Japanese-owned retail stores and factories in the week of
the Sept. 16, may not be fully reflect in the September Tankan results.

tokyo@mni-news.com
** MNI Tokyo Newsroom: 81-3-6860-4822 **

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