• Home
• About/Contact
• Economic Reports
• Research
• Advertising

• Business
• Economics
• Reports
• Finance
• Marketing
• Politics
• Real Estate
• Services
• Retail
• Tech

Subscribe

Tankan shows fundraising woes mixed with a surplus of equipment and workers

Earlier this morning, the Nikkei opened its article concerning today’s Tankan figures with a flurry: “The Bank of Japan’s latest tankan survey made it clear that companies are finding it increasingly difficult to raise funds, and are carrying more equipment and workers than necessary.”

According to the survey, which was released this morning by the Bank of Japan, the diffusion index measuring confidence at large firms fell 16 points to -16, while the score fell 12 points to -22 at medium-sized firms, and dropped 7 points to hit -28 amongst small enterprises.

Amongst manufacturers of all sizes, the diffusion index fell 14 points to -25. At non-manufacturers, the score slid 7 points to -23. Amongst all firms of any size in any industry, the diffusion index fell 10 points to -24.

We can expect to see pressure put on the Bank of Japan to lower interest rates even further, though there isn’t much wriggle room down from 0.3%. Some commentators expect to see a return of the Zero Interest Rate Policy that was abandoned in an attempt to return to “normalcy.”

Unfortunately, we are bound to see further waves of job cuts and pullbacks in capital spending. It’s not quite yet time for normalcy.

Bank of Japan’s December Tankan survey shows dropping business sentiment

A week before the Bank of Japan released its quarterly Tankan (Business Sentiment) survey yesterday, we predicted a fall in sentiment amongst large manufacturers, and said that we might again see a situation coming in which sentiment at nonmanufacturers moves higher than that of manufacturing firms.

We were hardly alone in expecting a drop in the score for manufacturers; most sources I follow and people I’ve talked to had expected something in the 20-22 range. Given that the score for sentiment at large manufacturers was 23 in the September survey, it seems that most sources were expecting a drop of 1-3 points. Read more

July Tankan Survey Holds at March Levels

The 133rd edition of the Bank of Japan’s Tankan survey was published this morning, and seems to add further weight to the position that the Bank of Japan will raise interest rates again sooner rather than later. The Tankan shows business sentiment amongst large manufacturers to be exactly where it was last time, at 23.

When the April report was released, it was news that the 23 score was the first drop in a year, and that was seen as a sign that the Bank of Japan could not raise interest rates just yet. This time, media sources are reporting the score as a sign that the BOJ will likely raise interest rates in August - which I finally came out and said would happen on June 21. In that piece, I was discussing Morgan Stanley Chief Economist Takehiro Sato’s writings on the upcoming Tankan survey. Today, after the Tankan was released, Sato had this to say to Bloomberg: “The survey confirms the healthy sentiment of large companies and solid prospects for the economy.”

Although this is true, the survey also shows darkness on the horizon. The future forecast levels are down, not up. Companies say that will spend more in the coming fiscal year, but they seem worried about rising costs.

What should worry them just as much is the lack of price inflation in Japan. One reason BOJ governor Fukui has given for sluggish CPI growth has been the spike in gasoline prices last year. He thinks once those are flushed out, CPI will show appropriate levels. Claus Vistesen of Japan Economy Watch recently took this on, and shows a simple chart with inflation, core inflation and core inflation without fuel costs. His chart shows dangerous things once fresh food and energy are stripped out, and little reason to be positive about inflation growth for the future. In other words, CPI prospects for June don’t look much better than they have over the past few months, when they’ve been consistently down.

Back to the Tankan. These two charts show the Tankan scores since mid-1973 (Manufacturers are on the right and non-manufacturers on the left). It seems as though we need to be asking whether or not the current high cycle has already peaked, especially as firms have said they intend to spend more while revising downward their profit projections for this financial year. Click to view a full-size version…

BOJ’s Tankan survey slips

Released yesterday, the Bank of Japan’s quarterly Tankan survey showed that confidence at the nation’s large manufacturers declined over the previous quarter. The index’s score slipped from 25 in December to 23 in March, showing its first drop in a year.

The 23 score means that those firms who think business conditions are favorable outnumbered those who think they are negative by 23 percentage points. Many economists ad predicted a slight fall, usually in the 24 point area.

This announcement supports the view that the BOJ will not be able to raise interest rates again just yet, although such a move would be difficult with Upper House elections coming in July.

It seems that large manufacturers seem most worried about a slowdown in the US economy, as the US remains the largest consumer of Japanese exports. A slowdown there could be sharply felt across the economy, as exports have slowing been making up more and more of Japan’s GDP as the economy has picked up steam.

Copyright © 2006-2010 Japan Economy News

Privacy Policy | Disclaimer