JP: Tankan

Sun Dec 13 17:50:00 CST 2015

Consensus Actual Previous
Large Mfrs 10 12 12
Small Mfrs 1 0 0
CAPEX 7.8% 6.4%

Fourth quarter Tank large manufacturers' index reading was plus 12, unchanged from the third quarter. Expectations were for the reading to slip to plus 10. According to the Bank of Japan, all firms' sentiment outlook was weaker than usual. The BoJ noted that major firms were supported by the drop in crude oil prices. The Bank also noted that domestic supply/demand conditions lacked recovery momentum. However, output and input conditions have improved slightly.

Small manufacturers' index was unchanged at zero, slightly under forecasts. Small enterprises CAPEX were down 0.2 percent, an improvement from September's minus 6.1 percent reading. Large enterprises' CAPEX were up 10.8 percent in December. Overall CAPEX was up 7.8 percent.

This survey, which is conducted quarterly by the Bank of Japan, is considered the most complete reading of Japanese economic performance. The Tankan surveys individual components of the economy such as large and small manufacturing and nonmanufacturing enterprises. A key component of the survey deals with capital expenditures (CAPEX) going forward.

The Bank of Japan's Tankan survey is considered one of the most important indicators of the economy's health and helps the Bank of Japan determine monetary policy. It is widely used by investors to determine future investments in Japan. Firms are asked questions that cover a wide range of topics including the future direction of capital expenditure and pricing as well as the corporate outlook towards employment and the overall economy.

The data are broken down by large, medium and small manufacturers as well as the non-manufacturing sectors. A key number to watch is the all industries capital expenditure or CAPEX measures capital expenditure by all Japanese industries except the financial industry. The large manufacturers' index reflects the large international companies while the small manufacturers' index is reflects the domestic economy.