| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Large Manufacturer Sentiment Index | 10 | 6 to 11 | 11 | 12 | 13 |
| Large Non-Manufacturer Sentiment Index | 33 | 30 to 34 | 34 | 30 | 32 |
| Small Manufacturer Sentiment Index | -2 | -4 to 0 | -1 | 1 | 2 |
| Small Non-Manufacturer Sentiment Index | 15 | 12 to 16 | 13 | 14 | |
| Large Firms Capital Expenditure Plans | 10.4% | 9.5% to 12.8% | 11.5% | 13.5% | 13.2% |
| Small Firms Capital Expenditure Plans | 7.8% | -0.8% to 13.9% | 8.4% | 10.3% | 8.3% |
Highlights
The Bank of Japan's quarterly Tankan business survey showed confidence among manufacturers fell slightly in March as suspended vehicle output over a safety test scandal triggered a widespread slump in overall production while sentiment among some non-manufacturers continued improving but the effects of domestic pent-up demand for traveling and eating out and strong post-Covid inbound spending appeared to have lost some steam.
The Tankan diffusion index showing sentiment among major manufacturers posted its first drop in four quarters, slipping back to 11 from 13 (revised from 12) in December, when it rose more than expected from 9 in September. It was just above the median forecast of 10 (forecasts ranged from 6 to 11). December's reading of 13 remains the highest since 14 in March 2022 but below the recent peak of 18 seen in both December and September 2021.
The index measuring sentiment among major non-manufacturers stood at 34, hitting the highest since 41 in September 1991 and marking the eighth straight quarterly increase after rising to 32 (revised from 30) in December from 27 in September. It was also slightly above the median forecast of 33 (ranging from 30 to 34).
Major firms projected their plans for business investment in equipment would rise a combined 11.5 percent on the year in fiscal 2023 ending in March 2024, revised down from the 13.2 percent increase (revised from 13.5 percent) planned in the December survey. It was slightly higher than the median forecast of a 10.4 percent increase (forecasts ranged from 9.5 percent to 12.8 percent gains). Their plans for fiscal 2024 are a 4.0 percent increase over the previous year, higher than the median forecast of a 3.0 percent rise. A year ago, large firms projected a 3.2 percent increase for fiscal 2023, a solid start given slowing global demand and concerns about banking failures in the US and Europe at the time.
Smaller firms largely maintained their combined capital spending plans at an 8.4 percent increase in fiscal 2023, instead of revising them down (consensus was a 7.8 percent rise) after raising their plans to an 8.3 percent rise (revised down from a 10.3 percent gain) in December. For fiscal 2024, smaller firms projected a 3.6 percent drop, compared to the median forecast of a 1.0 percent fall and an unusually bullish 1.4 percent rise planned in March 2023. Small businesses tend to forecast a decline at the start of the new fiscal year and revise up their plans later in the year.
Capex plans are generally supported by demand for automation amid labor shortages as well as government-led digital transformation and emission control.
Econoday's Relative Performance Index (RPI) stands at plus 2, just above zero, which indicates the Japanese economy is performing largely as expected after underperforming recently. Excluding the impact of inflation, the RPI is at plus 3.
BoJ policymakers will analyze this and other pieces of data ahead of their next policy meeting on April 25-26, when they are expected to leave its stance unchanged. At the March meeting, the board decided in a majority vote to end the seven-year-old yield curve control framework and conducting the bank's first rate hike in 17 years by lifting the negative short-term interest rate target. BoJ officials have stressed that the policy change should not be seen as tightening and that financial conditions will remain accommodative for now.
The Tankan diffusion index showing sentiment among major manufacturers posted its first drop in four quarters, slipping back to 11 from 13 (revised from 12) in December, when it rose more than expected from 9 in September. It was just above the median forecast of 10 (forecasts ranged from 6 to 11). December's reading of 13 remains the highest since 14 in March 2022 but below the recent peak of 18 seen in both December and September 2021.
The index measuring sentiment among major non-manufacturers stood at 34, hitting the highest since 41 in September 1991 and marking the eighth straight quarterly increase after rising to 32 (revised from 30) in December from 27 in September. It was also slightly above the median forecast of 33 (ranging from 30 to 34).
Major firms projected their plans for business investment in equipment would rise a combined 11.5 percent on the year in fiscal 2023 ending in March 2024, revised down from the 13.2 percent increase (revised from 13.5 percent) planned in the December survey. It was slightly higher than the median forecast of a 10.4 percent increase (forecasts ranged from 9.5 percent to 12.8 percent gains). Their plans for fiscal 2024 are a 4.0 percent increase over the previous year, higher than the median forecast of a 3.0 percent rise. A year ago, large firms projected a 3.2 percent increase for fiscal 2023, a solid start given slowing global demand and concerns about banking failures in the US and Europe at the time.
Smaller firms largely maintained their combined capital spending plans at an 8.4 percent increase in fiscal 2023, instead of revising them down (consensus was a 7.8 percent rise) after raising their plans to an 8.3 percent rise (revised down from a 10.3 percent gain) in December. For fiscal 2024, smaller firms projected a 3.6 percent drop, compared to the median forecast of a 1.0 percent fall and an unusually bullish 1.4 percent rise planned in March 2023. Small businesses tend to forecast a decline at the start of the new fiscal year and revise up their plans later in the year.
Capex plans are generally supported by demand for automation amid labor shortages as well as government-led digital transformation and emission control.
Econoday's Relative Performance Index (RPI) stands at plus 2, just above zero, which indicates the Japanese economy is performing largely as expected after underperforming recently. Excluding the impact of inflation, the RPI is at plus 3.
BoJ policymakers will analyze this and other pieces of data ahead of their next policy meeting on April 25-26, when they are expected to leave its stance unchanged. At the March meeting, the board decided in a majority vote to end the seven-year-old yield curve control framework and conducting the bank's first rate hike in 17 years by lifting the negative short-term interest rate target. BoJ officials have stressed that the policy change should not be seen as tightening and that financial conditions will remain accommodative for now.
Market Consensus Before Announcement
The Bank of Japan's quarterly Tankan business survey is forecast to show confidence among manufacturers fell in March as suspended vehicle output over a safety test scandal triggered a widespread slump in overall production while sentiment among non-manufacturers is expected to continue improving, led by hotels, restaurants and retailers amid strong post-Covid spending by visitors from other countries.
The Tankan diffusion index showing sentiment among major manufacturers is widely expected to post its first drop in four quarters, slipping back to 10 from 13 (revised from 12) in December, when it rose more than expected from 9 in September. The index measuring sentiment among major non-manufacturers is forecast at 33 for an eighth straight increase after rising to 32 (revised from 30) in December from 27 in September.
Major firms are expected to project their plans for business investment in equipment will rise a combined 10.4 percent on the year in fiscal 2023 ending on March 31, 2024, lower than the 13.2 percent (revised from 13.5 percent) increase planned in December. Their plans for fiscal 2024 are forecast to be a 3.0 percent rise. A year ago, large firms projected a 3.2 percent increase for fiscal 2023, a solid start given slowing global demand and concerns about banking failures in the US and Europe at the time.
Smaller firms are also expected to lower their combined capital spending plans to a 7.8 percent increase in fiscal 2023 after raising them to a higher-than-expected 10.3 percent rise in December. For fiscal 2024, smaller firms are expected to project a 1.0 percent drop, compared to an unusually bullish 1.4 percent rise planned in March 2023.
The Tankan diffusion index showing sentiment among major manufacturers is widely expected to post its first drop in four quarters, slipping back to 10 from 13 (revised from 12) in December, when it rose more than expected from 9 in September. The index measuring sentiment among major non-manufacturers is forecast at 33 for an eighth straight increase after rising to 32 (revised from 30) in December from 27 in September.
Major firms are expected to project their plans for business investment in equipment will rise a combined 10.4 percent on the year in fiscal 2023 ending on March 31, 2024, lower than the 13.2 percent (revised from 13.5 percent) increase planned in December. Their plans for fiscal 2024 are forecast to be a 3.0 percent rise. A year ago, large firms projected a 3.2 percent increase for fiscal 2023, a solid start given slowing global demand and concerns about banking failures in the US and Europe at the time.
Smaller firms are also expected to lower their combined capital spending plans to a 7.8 percent increase in fiscal 2023 after raising them to a higher-than-expected 10.3 percent rise in December. For fiscal 2024, smaller firms are expected to project a 1.0 percent drop, compared to an unusually bullish 1.4 percent rise planned in March 2023.
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.
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.
