The BOJ Tankan forecast indicates that the manufacturing DI will improve from the previous survey and that non-manufacturing will remain at a high level, while corporate capital investment plans are also expected to be revised upward.
As a premise for the September survey, the BOJ Tankan manufacturing business conditions DI is expected to improve from +22 in the previous survey to +26, while the DI for large non-manufacturers is expected to remain unchanged at +37. Although manufacturing is expected to show notable improvement, non-manufacturing is also forecast to remain at a high level, indicating that business sentiment across the corporate sector as a whole remains firm.
Amid continued cost increases, corporate earnings are expected to be supported by higher sales and progress in passing costs through to prices, while resilient domestic and overseas demand is also expected to underpin earnings. In particular, there is a view that demand related to AI and semiconductors will improve sentiment in the manufacturing sector.
The FY2026 capital investment plan is expected to be revised upward, particularly among small and medium-sized companies. Demand remains strong for labor-saving and efficiency-enhancing investment, AI- and semiconductor-related investment, digitalization, and the replacement of aging equipment. The Business Outlook Survey conducted by the Ministry of Finance has also confirmed upward revisions to capital investment plans.
Attention is also focused on inflation expectations and corporate finance-related items. The key question will be whether pass-through from input price judgments and output price judgments progresses and whether medium- to long-term inflation expectations remain elevated. While companies are conscious of rising borrowing rates, there is also a view that their assessments of funding conditions and lending attitudes have not deteriorated significantly.
If the Tankan shows, as expected, an improvement in business sentiment centered on manufacturing and continued strength in capital investment, it could provide grounds for the BOJ’s policy of further interest-rate hikes. It is also reported that the results could affect discussions over the timing of the next rate hike in December or January.