–Sentiment Among Manufacturers, Non-Manufacturers Seen Down After Recent Pickup
–Small Business Sentiment Indexes Expected to Remain in Negative Territory
–Major Firms Expected to Revise Down FY21 Capex Plans, See Small FY22 Gain
–Smaller Firms Playing Catchup in FY21 Capex as They Tend To Do Toward Fiscal Yearend
By Max Sato
Manufacturers are still struggling to meet reopening demand amid global semiconductor shortages and supply chain constraints. The spike in Covid cases sparked by the more contagious Omicron variant forced carmakers to suspend production in January, hit by clusters of workplace infections or mandatory quarantine among employees who came in close contact with people testing positive.
Non-manufacturers also suffered from slower business as consumers became more cautious about shopping at physical stores, visiting tourist spots and participating in public events.
The BOJ will release the results of the Tankan survey conducted from late February until late March at 0850 JST Friday, April 1 (1950 EDT/2350 GMT Thursday, March 31).
The survey is also expected to show large companies turned more cautious about their plans for investment in equipment while smaller firms revised up their capex plans, as they tend to do toward the March 31 end of every fiscal year. There is solid demand for investing in automation to cope with labor shortages, upgrading communications networks and reducing emissions.
The BOJ will digest this and other pieces of data ahead of its next policy meeting on April 27-28, at which the bank is expected to leave its easing stance unchanged as Japan’s gradual consumer inflation pickup from just above zero is unlikely to be anchored around the bank’s 2% target any time soon.
The bank’s branch managers will report on regional economic conditions at a quarterly meeting in Tokyo on April 11 ahead of the April 28 release of the quarterly Outlook Report, in which the bank provide updates on board members’ medium-term GDP and CPI forecasts.
Expected key points from the Tankan
* The Tankan diffusion index showing sentiment among major manufacturers is forecast at 11 in March (forecasts ranged from 6 to 15), down from 18 in December, when it was unchanged from September, according to the median projection by 10 economists compiled by Mace News. Six of the economists predict the index will fall to 11 or lower.
* The Mace News median forecast for the index measuring sentiment among major non-manufacturers is 5 for March (range: 2 to 7), down from 9 in December but higher than 2 in September.
* Looking three months ahead, economists expect the sentiment index for major manufacturers to stay at 11 (range: 6 to 14) and that for major non-manufacturers to improve to 8 (range: 5 to 10).
* The sentiment index for smaller manufacturers is forecast at -7 for March (range: -12 to -5), down from -1 in December. A half of the 10 economists foresee a slip to -7 or worse. The index for their non-manufacturing counterparts is seen at -9 (range: -12 to -4), also down from -4 three months earlier.
* The index for June is forecast at -8 for both smaller manufactures and non-manufacturers, little changed from March.
* 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 8.1% (forecasts by nine economists range from +5.6% to +8.7%) in fiscal 2021 ending this month, down from 9.3% planned in December and 10.1% in September.
* Smaller businesses are expected to report their capex plans for fiscal 2021 would rise a combined 5.8% (range: +4.6% to +7.0%) in fiscal 2021, up from 5.1% seen in the previous survey and 4.7% about six months earlier.
* For the 2022 fiscal year that starts on April 1, the median forecast by nine economists is an increase of just 2.5% (range: +1.2% to +4.3%) over fiscal 2021 for major firms and an 8.0% decrease among small businesses (range: -14.6% to +7.0%).