The large-manufacturers’ business conditions DI in the Bank of Japan’s September Tankan survey came in at +24, below the +25 forecast but remaining at a high level. A breakdown of the results and USD/JPY and Nikkei 225 moves immediately after the release are reviewed.
In the nationwide Short-Term Economic Survey of Enterprises (Tankan) for September released by the Bank of Japan, the business conditions DI for large manufacturers came in at +24, improving from +22 in the previous June survey but falling short of the market forecast of +25. The DI for large non-manufacturers was +35, slightly down from +37 previously. The forward-looking business conditions DI was +21 for large manufacturers and +30 for non-manufacturers. Overall, conditions were viewed as improving, although expectations incorporate a deterioration of around 3 points in the outlook.
In the market reaction immediately after the release, USD/JPY moved toward a weaker yen, rising to ¥157.58 during the 8:00 hour, ¥157.65 at 8:59 a.m. and ¥157.76 at 9:09 a.m. The Nikkei 225 initially showed little movement, then rose to the ¥67,300 range around 9:00 a.m. after the open and reached the ¥67,450 range at around 9:10 a.m. Improving sentiment among manufacturers and the yen’s decline were seen as supporting buying in the stock market.
In today’s breakdown, the business conditions DI for manufacturers was +24 and the forward-looking DI was +21, both below market expectations. The DI for non-manufacturers was +35, with a forward-looking DI of +30. The DI was +14 for small and medium-sized manufacturers and +15 for non-manufacturers, indicating greater improvement among smaller companies. Price expectations were 2.6% one year ahead and 2.5% five years ahead, slightly lower than previously. The DI for firms’ own selling prices was +40, while the input price DI was +59. Inflation expectations remained generally elevated, although upside risks were not prominent. The assumed exchange rate was revised toward a weaker yen, to ¥154.23 from ¥152.57 previously.
The employment conditions DI was -38 across all company sizes and industries, indicating that labor shortages are expected to intensify further, approaching bubble-era levels. Capital investment plans were up 11.3% year on year, a slight downward revision from +11.5% in the June survey and below expectations. The borrowing-rate conditions DI remained high at +68, suggesting that companies are taking rising interest rates into account in their financing stance.