BOJ “Tankan” Likely to Show 2nd Straight Fall in Biz Sentiment

June 25, 2018

Tokyo- Business sentiment among large Japanese manufacturers is seen declining, though moderately, in June from three months ago, down for the second straight quarter, according to 14 private think tanks' estimates on the Bank of Japan's ongoing "tankan" quarterly survey.

The 14 institutes' forecasts on the diffusion index for large manufacturers' current business conditions, the most closely watched item in the central bank survey, range from plus 20 to plus 23.

In the previous March tankan, the headline DI came to plus 24, down from plus 26 three months before, posting the first drop in eight quarters, apparently due to concerns about protectionist moves by the administration of U.S. President Donald Trump.

The DI represents the percentage of companies seeing good business conditions minus those feeling the opposite. The BOJ is scheduled to announce the results of the June tankan on July 2.

The Mizuho Research Institute, which estimates the June DI for large manufacturers at plus 22, cited rising labor costs and an increase in procurement costs stemming from higher crude oil prices as negative factors.

The Japan Research Institute noted that exports of electronic parts have been slow while Nomura Securities Co. pointed to worries about trade friction between the United States and China. The two institutes estimate the DI at plus 23 and plus 22, respectively.

The 14 think tanks' projections for large manufacturers' business outlook DI toward September range from plus 18 to plus 24.

Capital expenditures in fiscal 2018 are expected to increase steadily from the previous year. The average estimate among 13 of the 14 institutes on the growth in fiscal 2018 combined capital spending at large manufacturers and nonmanufacturers stands at 9.4 pct, stronger than the 2.3 pct expansion cited by surveyed companies in the March BOJ tankan. Jiji Press