Bank of Japan "Tankan" Business Survey: Review
September 28, 2010
Business sentiment improved clearly between June and September. A marginal deterioration had been predicted in the June corporate survey, but analysts had discounted those projections and were looking for September readings more or less consistent with what the Bank of Japan has just announced. As in the June survey, today’s report anticipates weaker readings in the next survey that will be taken in December. This is not surprising, considering the yen’s relentless strength. Indeed, sentiment would be even worse if business executives believed that the yen would remain at current levels. But they instead are predicting USD/JPY averaging 89.44 in October 2010-through-March 2011 compared to forecasts of 90.16 made three months ago.
The Tankan survey contains a wide body of information on prices, activity, inventories, the labor market and business expectations, but markets tend to pay most attention to the summary indications of business sentiment for different types of businesses. Diffusion indices in the table below were derived by subtracting the percent of respondents calling business conditions “unfavorable” from the percent characterizing such as “favorable.” Readings below zero indicate more pessimism than optimism. The abbreviations for big manufacturers and big non-manufacturers are Bm and Bnm, while Sm and Snm designate small-sized manufacturers and non-manufacturers. “All” signifies all big, medium, and small firms in the survey. The suffix “a” stands for actual, and “f” signifies a forecast of the diffusion index made three months earlier.
Respondents expect greater excess product market supply by December than now, and deflationary expectations have deepened a bit further. Investment plans in the present fiscal year ending March 2011 have been trimmed somewhat but remain positive at 4.0% among large manufacturers and 1.6% among other large companies. Smaller firms envisage less investment in FY10 than FY09, however, such that all firms collectively now predict a 1.0% drop in capital spending compared to a prediction of +0.5% made three months ago. Projected corporate earnings and sales were each revised upward. All firms on average are predicting increases of 19.7% in profits and 4.1% in sales this financial year.
Bottom line, while the third quarter developed better than had been expected, a layer of apprehension persists about the future, and such has become more amplified in some respects.
| Bm | Bnm | Sm | Snm | All | |
| Dec 1998 | -49 | -39 | -56 | -43 | |
| Dec 1999 | -17 | -19 | -32 | -28 | |
| Dec 2000 | 10 | -10 | -16 | -23 | |
| Dec 2001 | -38 | -22 | -49 | -39 | -40 |
| Dec 2002 | -9 | -16 | -33 | -36 | -28 |
| Dec 2003 | 11 | -9 | -13 | -28 | -15 |
| Dec 2004 | 22 | 11 | 5 | -14 | 1 |
| Dec 2005 | 21 | 17 | 7 | -17 | 5 |
| Dec 2006 | 25 | 22 | 12 | -4 | 10 |
| Dec 2007 | 19 | 16 | 2 | -12 | 2 |
| Mar 2008 | 11 | 12 | -6 | -15 | -4 |
| Jun 2008 | 5 | 10 | -10 | -20 | -7 |
| Sep 2008 | -3 | 1 | -17 | -24 | -14 |
| Dec 2008 | -24 | -9 | -29 | -29 | -24 |
| Mar 2009 | -58 | -31 | -57 | -42 | -46 |
| Jun 2009 | -48 | -29 | -57 | -44 | -45 |
| Sep 2009 | -33 | -24 | -52 | -39 | -38 |
| Dec 2009 | -25 | -21 | -41 | -34 | -31 |
| Mar 2010 | -14 | -14 | -30 | -31 | -24 |
| Jun 2010 | 1 | -5 | -18 | -26 | -15 |
| Sep 2010a | 8 | 2 | -14 | -21 | -10 |
| Dec 2010f | -1 | -2 | -22 | -29 | -17 |
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan, Tankan
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