| Consensus | Consensus Range | Actual | Previous | |
| Large Manufacturer Sentiment Index | 17 | 8 to 18 | 17 | 15 |
| Large Non-Manufacturer Sentiment Index | 34 | 28 to 35 | 36 | 34 |
| Small Manufacturer Sentiment Index | 7 | -1 to 9 | 7 | 6 |
| Small Non-Manufacturer Sentiment Index | 14 | 8 to 16 | 16 | 15 |
| Large Firms Capital Expenditure Plans | 9.7% | 9.0% to 11.4% | 10.9% | 12.6% |
| Small Firms Capital Expenditure Plans | -0.6% | -2.9% to 4.4% | -2.3% | 0.1% |
Highlights
The Bank of Japan's quarterly Tankan business sentiment survey showed a slight improvement among large manufacturers in the March quarter, led by non-ferrous metal producers, production machine makers and the auto industry, indicating that firms are generally weathering the drag from stiff U.S. tariffs, but major refineries turned sharply pessimistic in the face of a spike in global crude oil prices.
Higher energy and labor costs also mildly dampened confidence among cost-sensitive sectors among non-manufacturers, namely transport firms/postal services as well as providers of electricity and natural gas. Weaker tones in those sectors offset upbeat views among large hotels/restaurants and leasing firms, leading to a flat March reading for non-manufacturer sentiment.
The Iran war that broke out in late February appears to have had only a limited immediate impact on many sectors surveyed by the BOJ but how the regional conflict will affect global growth and inflation remains uncertain, resulting in modest declines in the near-term outlook among nearly all industries. Firms in the Tankan survey tend to produce cautious forecasts for their sentiment three months ahead.
Details:
BOJ March quarter Tankan large manufacturer sentiment index at +17 (Dec revised to +16 from +15); median forecast +17
BOJ March Tankan large non-manufacturer sentiment index at +36 (Dec revised to +36 from +34); median forecast +34
BOJ March Tankan smaller manufacturer sentiment index at +7 (Dec revised to +7 from +6); median forecast +7
BOJ March Tankan smaller non-manufacturer sentiment index +16 (Dec revised to +17 from 15); median forecast +14
BOJ March Tankan: large firm fiscal 2025 combined capex plans +10.9% y/y (Dec revised to 12.2% from 12.6%, Sept +12.5%, June +11.5, Mar +3.1%); median forecast +9.7%
BOJ March Tankan: smaller firm fiscal 2025 combined capex plans -2.3% y/y (Dec revised to -2.7% from 0.1%, Sept -2.3%, June -5.6%, Mar -10.0%); median forecast -0.6%
BOJ March Tankan: large firm fiscal 2026 combined capex plans +3.3% y/y; median forecast +2.9%
BOJ March Tankan: smaller firm fiscal 2026 combined capex plans -8.1% y/y; median forecast -8.6%
BOJ March Tankan: major manufacturers see inflation at 2.2% a year from now vs. 2.1% forecast in Dec survey
BOJ March Tankan: major manufacturers see inflation at 2.1% in 3 years from now vs. 2.0% forecast in Dec survey
BOJ March Tankan: major manufacturers see inflation at 2.0% in 5 years from now vs. 1.9% forecast in Dec survey
BOJ March Tankan: all firms assume fiscal 2025 USD/JPY FX rate to average Y148.29 (Dec revised to Y147.11 from Y147.06)
BOJ March Tankan: all firms assume fiscal 2026 USD/JPY FX rate to average Y150.10 (first estimate)
BOJ March Tankan: all firms assume fiscal 2025 EUR/JPY FX rate to average Y167.14 (Dec revised to Y164.48 from Y164.45)
BOJ March Tankan: all firms assume fiscal 2026 EUR/JPY FX rate to average Y171.77 (first estimate)
BOJ Mar quarter Tankan shows firms, big and small, see both sales prices and costs up from Dec Tankan
BOJ Mar Tankan: firms judge degree of widespread labor shortages unchanged from Dec, expect labor conditions to become tighter in June
BOJ Mar Tankan large non-mfg sentiment flat as sharp gains in hotels/restaurants, leasing offset by drops in transport, utilities, svcs for biz
BOJ Mar Tankan smaller non-mfg sentiment slight dip reflects slump in hotels/restaurants, slight drop in leasing, construction, retail
BOJ Mar Tankan smaller mfg sentiment flat as weaker lumber/wood, pulp/paper, autos offset firmer refineries (big refineries down), general machines
Market Consensus Before Announcement
The Bank of Japan’s quarterly Tankan business sentiment survey is expected to show a slight improvement among large manufacturers in the March quarter, while the recent plunge in the number of Chinese tourists amid bilateral diplomatic rows is seen weighing on sentiment among both large and small non-manufacturers.
Geopolitical uncertainties in the Middle East triggered by U.S. and Israeli attacks on Iran in late February appear to have had only a limited immediate impact on Japanese corporate sentiment. Still, concerns about the outlook are intensifying, prompting firms to remain cautious on capital spending as volatile global oil prices and rising domestic energy costs add to uncertainty.
Against this backdrop, the March Tankan diffusion index for large manufacturers is projected at 17, edging up from a revised 16, previously 15, in December and marking a fourth straight quarterly increase. The index for small manufacturers is expected to be unchanged at 7, compared with a revised 7, previously 6.
Sentiment among large manufacturing firms is expected to be supported by continued demand for automation amid labor shortages, as well as government-backed digital transformation and decarbonization initiatives.
For service providers, the Japan-China feud over Taiwan is hurting hotels and restaurants. The index for large non-manufacturers is seen slipping to 34 in March from a revised 36 (previously 34) in December, while sentiment among small non-manufacturers is forecast to fall for the first time in two quarters to 14, after the December reading was revised to 17 from 15.
The Bank of Japan revised the December figures earlier this month after expanding the number of surveyed firms.
Capital expenditure plans for fiscal 2026 starting on April 1 are expected to get off to a weaker start amid the Iran war, strained Japan-China relations and rising domestic interest rates.
Large firms are expected to scale back their capital investment plans for fiscal 2025, with combined capex forecast to rise 9.7% on the year in the March Tankan, slowing from a revised 12.2% increase in December (previously 12.6%). Smaller firms are also seen trimming their investment plans, with fiscal 2025 capex projected to fall 0.6% on the year, compared with a revised 2.7% decline in December (previously a 0.1% rise).
For fiscal 2026, large firms are expected to post a more moderate increase in capital spending, with plans seen rising 2.9% on the year, suggesting a cautious start to the new fiscal year. Smaller firms are forecast to cut investment more sharply, with capex plans projected to fall 8.6% on the year.
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.