MNI: BOJ Sept Tankan To Show Key Sentiment Rises

Economists predict the Bank of Japan’s September Tankan survey will show a modest improvement in benchmark business sentiment from three months ago, with capital investment plans by major firms for fiscal 2025 likely to remain solid.

While supportive for the BOJ in seeking opportunities to raise the policy rate, the results alone are unlikely to be decisive for a hike at the October meeting. Uncertainty over trade policy continues, though the July 22 Japan-U.S. trade deal is expected to help lift sentiment.

Economists expect the diffusion index (DI) for sentiment among major manufacturers – the benchmark index – to reach +15 in September, up from +13 in June, with forecasts ranging from +12 to +15. 

The median DI for major non-manufacturers is expected to remain at +34, with forecasts ranging from +32 to +35. Among smaller firms, the DI is projected at +2 for manufacturers – up from +1 – and +15 for non-manufacturers, unchanged from June.

Capital expenditure plans by major firms in fiscal 2025 are expected to rise 11.3%, slightly down from the 11.5% forecast in June. Smaller firms’ capex plans are likely to fall 1.1%, up from -5.6% in June. While overall investment plans remain solid, execution could be tempered by ongoing uncertainties and slowing demand.

BOJ officials are paying close attention to corporate inflation expectations and trends in sales, and input prices, key measures of firms’ price-setting power and a critical factor for achieving the central bank’s 2% inflation target.

The BOJ will release the September Tankan results at 0850 JST on Oct 1 (2350 GMT September 30).