JP: Tankan


Sun Apr 01 18:50:00 CDT 2018

Consensus Actual Previous
Large Mfrs 26 24 25
Small Mfrs 9 15 15
CAPEX -0.7 6.3

Highlights
Japan's Tankan survey shows business sentiment in both the manufacturing and non-manufacturing sectors were solid but little changed in the three months to March. Firms in the manufacturing sector expect relatively steady growth in capital expenditure in the fiscal year ending March 2019, but this is outweighed by weaker capex plans by firms in the non-manufacturing sector.

The business conditions index moderated from 25 for the three months to December (its highest level since 2006) to 24 in the three months to March for large manufacturers, below the consensus forecast for an increase to 26. The equivalent index fell from 20 to 19 for medium-sized manufacturers was unchanged at 15 for small manufacturers. Aggregating manufacturers of all sizes, the index fell from 19 to 18, broadly consistent with recent PMI survey results showing solid conditions in the manufacturing sector in recent months.

Business sentiment in the non-manufacturing sector was again little changed from the previous quarter. For non-manufacturers, the business condition index fell from 25 to 23 for large firms, rose from 20 to 21 for medium-sized firms, and from 9 to 10 for small firms, with the aggregate index unchanged at 15.

For firms of all sizes across both the manufacturing sector and the non-manufacturing sector, the business conditions index increased from 16 in the three months to December to 17 in the three months to March.

Capital expenditure across firms of all sizes in both the manufacturing and non-manufacturing sectors is forecast to decline by 0.7 percent in the fiscal year ending March 2019 after estimated growth of 4.0 percent in the fiscal year ended March 2018. Firms in the manufacturing sector forecast capital expenditure to grow by 6.0 percent in the new fiscal year, down slightly from estimated growth of 6.5 percent for the fiscal year just ended. This reflects stronger plans for medium-sized manufacturers, offset by weaker plans for large and small firms in the sector. Firms in the non-manufacturing sector, however, forecast capital expenditure to drop 4.5 percent in the new fiscal year after estimated growth of 2.7 percent in the fiscal year just ended.

Definition
The Tankan survey, which is conducted quarterly by the Bank of Japan, is considered the most complete reading of Japan's 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.

Description
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.