By David Liu, THE TAKEAWAY : Bank of Japan’s Tankan Survey shows better expectations from manufacturing sectors > Increased risk appetite, possible additional budgetary easing > Yen weakens The newest Tankan economic survey for major Japanese industries in Q3 showed welcomed improvement in the manufacturing sectors as companies expected increased recovery spending and overseas demand to buoy demand for heavy items. Expectations for the services sector weakened on a slowing domestic economy.
The Q3 survey showed the higher outlook index being led by large manufacturing, with financial position for large enterprises growing from 15 in Q2 to 16 this quarter. Additionally, the motor vehicles sector led large business confidence, rising from 6 index points in the June survey to 13 currently, with expectations of 24 in the Q4 survey. This improvement most likely indicates that heavy manufacturing industries are factoring in robust growth from overseas and domestic markets despite a record yen, and that the new Noda administration may increase their actions on stemming the appreciation of the yen. BoJ Tankan Outlook Indices. Data from Bloomberg LP Professional Terminal. The Japanese yen weakened against the US dollar immediately after the report on higher risk appetite following the higher outlook in the key manufacturing sector. Although longer term prospects for the Japanese economy are showing improvement, supported by a combination of government recovery support and spending, the yen remains driven by yields and risk flows from the ongoing European debt crisis. At the time of writing, the yen has fallen 0.091% against the dollar, with S&P500 equity futures slightly weaker at -0.089%.
|Tankan Large Manufacturers Index (Q3)||2||2||-9|
|Tankan Non-Manufacturing Index (Q3)||1||2||-5|
|Tankan Large Manufacturers Outlook (Q3)||4||3||2|
|Tankan Non-Manufacturing Outlook (Q3)||1||2||-2|
|Tankan Large All Industry Capex (Q3)||3.0%||4.3%||4.2%|
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