BOJ Tankan Report Suggests Slight Improvement in Japan's Business Sentiment

22 Sep, 2023

BOJ Tankan Report Suggests Slight Improvement in Japan's Business Sentiment

A highly anticipated survey conducted by the central bank is expected to reveal a modest improvement in Japan's business confidence during the third quarter, as indicated by a Reuters poll. This suggests that the country's economy is resilient in the face of challenges stemming from the global economic slowdown.

According to the poll, the survey is also likely to indicate that corporate spending enthusiasm remains robust. Such findings could bolster the argument for the Bank of Japan (BOJ) to gradually scale back its extensive monetary stimulus measures.

Analysts at SMBC Nikko Securities anticipate that the sentiment among big manufacturers, particularly automakers, likely saw an improvement. Additionally, they expect the service sector's mood to brighten, attributed to the easing of pandemic restrictions and the return of foreign tourists.

The BOJ's "tankan" business survey is anticipated to reveal that the confidence index for large manufacturers increased from 5 in June to 6 in September, marking a second consecutive quarter of improvement. Similarly, the sentiment index for non-manufacturers is expected to have risen from 23 to 24, marking the sixth consecutive quarterly improvement.

The poll indicates that major corporations are planning to boost their capital expenditure by 13.6% in the current fiscal year, which concludes in March 2024.

The BOJ is scheduled to release this data on October 2nd at 8:50 a.m. (2350 GMT, October 1st). The tankan results are expected to be closely scrutinized by BOJ policymakers to determine whether economic conditions are aligning to initiate interest rate hikes.

In a separate Reuters poll conducted on Thursday, the majority of economists expressed the expectation that the BOJ will conclude its negative interest rate policy next year.