Cabinet Office Business Outlook Survey: Expectedly low, yet somewhat bullish

June 22, 2007
By Ken Worsley

The Cabinet Office released its quarterly Business Outlook Survey on Wednesday, and it reported that sentiment at large Japanese manufacturers in the April-June quarter fell to minus 2.2 from plus 0.1 the previous quarter. Not to be beat out, sentiment at non-manufacturers plunged to minus 0.2 from 9.8. The index of business conditions at companies capitalized at 1 billion yen or greater fell for the third consecutive month, from 6.2 to 0.9.

These results were not entirely unexpected. High costs for raw materials and weak industrial production couped with low machinery orders seem to have made a bearish result a foregone conclusion. Add in the the fact that historically, the April-June report nearly always delivers the lowest results of the year, and no one should be too surprised by these drops.

Might this affect any upcoming BOJ decisions? We don’t think so. The BOJ will be much more focused on the upcoming Tankan survey (it’s own data), GDP growth and any potential for growth in CPI. Since a July rate hike is pretty much out of the question, this report will be long forgotten by the time the Policy Board sits down for its August meeting.

Not to mention, there was some good news in the Cabinet Office’s report. Companies of all sizes project a 2.2% growth in sales in fiscal 2007 and a 4.5% increase in pretax profits. Those same companies also project a 3.3% rise in capital spending over the same period. Then again, the previous report showed a projected 5.3% decrease in the cards, so if you don’t like the weather in this report, you might just have to wait for the next one.

Filed Under Cabinet Office, Economic Reports