MNI BRIEF: BOJ Dec Tankan To Show Key Sentiment Edging Up

The Bank of Japan’s December Tankan survey is expected to show a slight improvement in benchmark business sentiment from three months earlier, while capital investment plans by major firms are set to remain solid, economists predict.

The results, due Dec. 15, will likely support the BOJ’s search for an opportunity to raise the policy rate next week, though the final decision will hinge on wage-hike information gathered from regional branches and hearings with major companies.

Economists expect the diffusion index (DI) for sentiment among major manufacturers — the survey’s benchmark gauge — to rise to +15 in December from +14 in September. The DI measures the share of firms reporting improving conditions minus those seeing deterioration, with a positive reading indicating more optimism than pessimism.

The median forecast for sentiment among major non-manufacturers is +34, unchanged from September.

Among smaller firms, the DI for manufacturers is projected to rise to +2 from +1, while small non-manufacturers are expected to remain at +14.

The survey is also likely to show that capital investment plans by major firms in fiscal 2025 will increase 11.7%, revised up from +12.5% in September. Capex plans by smaller firms are expected to rise 1.1%, a sharp upward revision from -2.3%.

BOJ officials are watching closely to see whether corporate inflation expectations remain firm and how sales and input prices are evolving, as both are key to judging the strength of corporate price-setting — a critical condition for achieving the 2% inflation target.