An analysis has been presented examining the current readings and potential future nonlinear movements in the Bank of Japan Tankan’s corporate finance items and funding conditions DI as clues for determining whether the Bank of Japan’s rate hikes are moving toward an end.
This analysis points out that, because prices are a lagging indicator, there are limits to reading monetary policy directly from them. It suggests that the Bank of Japan Tankan’s corporate finance items, which are available relatively quickly, may be effective indicators when assessing whether the Bank of Japan’s rate hikes have ended. Assessing current financial conditions through the Tankan is said to affect decisions on capital investment and the state of funding conditions. The figures discussed below suggest that the overall assessment is favorable at present.
The June Tankan’s lending attitude DI for all enterprises and all industries was +13, while its funding conditions DI was +11. These were characterized as favorable levels over the long term, suggesting that the cumulative effects of rate hikes have not yet strongly affected financial conditions.
However, the effects of cumulative rate hikes may emerge in these indicators in the future. The author argues that, if nonlinear deterioration is observed, concern would be shared over excessive tightening of economic activity and prices.