–Sentiment Among Manufacturers Seen Flat After Recent Gains
–Non-Manufacturers Likely Report Better Sentiment on Eased Covid Rules
–Major Firms Expected To Revise Down Their Capex Plans
–Smaller Firms Tend To Revise Up their Capex Plans Later in Fiscal Year
By Max Sato
(MaceNews) – The Bank of Japan’s quarterly Tankan business survey is expected to show confidence among manufacturers in Japan, big and small, was little changed in December as their sentient had recovered steadily from the pandemic-hit 2020.
By contrast, non-manufacturers are likely to have reported an improved sentiment from September as the government lifted its Covid state-of-emergency restrictions on Oct. 1, underpinning retail sales and some services.
The BOJ will release the results of the Tankan survey conducted from mid-November until mid-December at 0850 JST Monday, Dec. 13 (1850 EST/2350 GMT Sunday, Dec. 12).
Factories in Southeast Asia resumed operations after the Delta variant prompted lockdowns in August, alleviating supply chain constrains somewhat for automakers and electronics firms, but reports of an outbreak of the new Omicron variant in late November might have made business outlook generally uncertain.
The survey is expected to show large companies may be more cautious about their plans for investment in equipment while smaller firms revised up their capex plans, as they often do toward the end of the fiscal year. Some sectors need to invest in automation to cope with constant labor shortages while others are upgrading their communications networks.
The BOJ will digest this and other pieces of indicators ahead of its policy meeting on Dec. 16-17, at which the bank is expected to leave its accommodating easing stance unchanged as consumer prices remain subdued just above zero despite a 41-year high in producer price gains. The focus is on the Jan. 17-18 meeting, when the bank releases its quarterly Outlook Report to provide updates on board members’ medium-term GDP and CPI forecasts.
Expected key points from the December BOJ Tankan
- The Tankan diffusion index showing sentiment among major manufacturers is forecast at 18 in December (forecasts ranged from 14 to 20), unchanged from 18 in September, when it gained from 14 in June for the fifth consecutive quarterly improvement, according to the median projection by 10 economists compiled by Mace News. A half of the economists predict an improvement while the other half expect a slight setback.
- The Mace News median forecast for the index measuring sentiment among major non-manufacturers is 6 in December (range: 4 to 11), up from 2 in September, when it rose from 1 in June.
- The sentiment index for small and medium manufacturers is forecast at -4 for December (range: -7 to 2), down slightly from -3 in September. A half of the 10 economists foresee an improvement while the rest expect unchanged to lower figures. The index for their non-manufacturing counterparts is see at -6 (range: -9 to -4), up from -10 three months earlier.
- 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.
- The Tankan is also expected to show that major firms planned to increase their business investment in equipment by a combined 9.6% (economist forecasts range from +8.0% to +10.2%) in fiscal 2021 ending March next year, down from 10.1% planned in September.
- * Smaller businesses are expected to report their capex plans for fiscal 2021 would rise a combined 7.0% (range: +3.3% to +9.0%) in the current fiscal year, up from 4.7% seen in the previous survey.
Contact this reporter: max@macenews.com
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