Key biz sentiment DI seen edging down in BOJ “Tankan”

March 26, 2018

Tokyo- The Bank of Japan's "tankan" quarterly survey for March is expected to show a slight downturn in business sentiment among large manufacturers, due partly to the yen's recent strength.

The central bank applies new standards for the tankan beginning with the March survey. It is scheduled to release the March survey results on April 2.

In the previous December 2017 tankan, the headline diffusion index for large manufacturers' current business conditions came to plus 25 under the old standards. Under the new standards, the DI stands at plus 26. The DI represents the percentage of companies seeing good business conditions minus that of firms feeling the opposite.

Nine private economic research institutes on average expect the key DI to come to plus 25 in the March tankan, down by one point from December under the new standards, although the level is still high on the back of brisk exports of semiconductors and other items. This would mark the first decline in eight quarters.

Four of the nine expect the closely watched DI to decline, while another four estimate the index at plus 26 and one think tank at plus 27.

"The yen's appreciation and lower stock prices will push down business sentiment," said an official at the Japan Research Institute, which projects a reading of plus 24.

Meanwhile, all nine think tanks expect large manufacturers' business condition outlook DI toward June will fall from their respective estimates for the March index, with the average projection among them coming to plus 21.

Many of the institutes voiced concerns over the yen's possible further rises and protectionist moves abroad.

Eight of the nine institutes showed projections for fiscal 2018 combined capital expenditures at large manufacturers and non-manufacturers. Their average forecast on year-on-year capital spending growth stands at 0.6 percent. Jiji Press