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Japan Business Sentiment Likely Worsening

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Private think tanks expect the Bank of Japan’s “tankan” quarterly corporate survey for September to show deterioration in business sentiment for the second consecutive quarter.

The average estimate of the 14 think tanks on the diffusion index for large manufacturers’ current business conditions stands at plus 10, down from plus 12 in the previous June survey, which showed the DI’s first decline in sixth quarters.

Of the 14 think tanks, 13 expect the DI to deteriorate for the second straight quarter due to the effects of the consumption tax hike in April, bad weather and sluggish exports.

The central bank will release the tankan report on Oct. 1.

A total of 13 also forecast deterioration in the DI for large nonmanufacturers, including those in the retail and service sectors.

“The decline in the real purchasing power of households, caused by the tax hike and the yen’s depreciation, has been a drag on recovery of personal consumption,” said Ryutaro Kono, chief economist at BNP Paribas Securities (Japan) Ltd.

The 14 think tanks’ average projection for large manufacturers’ outlook DI for three months ahead is plus 12, better than the average forecast for the current condition DI. Some, however, see it flat or falling for large nonmanufacturers or small businesses as the weaker yen has been increasing material costs.

via Japan News

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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