April 01, 2013
Summary
◆In the Bank of Japan (BOJ) March Tankan survey of corporate sentiment, business sentiment improved in a broad range of industries, confirming a turning around of the economy. However,some worrisome developments were seen—the margin of improvement undershot the market consensus in general, sentiment unexpectedly worsened for small manufacturers, and the capex projection fell short of expectations.
◆The DI of current business conditions for large manufacturers was –8 points, improving from the previous survey (–12) but short of consensus expectations (–7). The current DI of supply and demand conditions for products improved for both domestic and overseas markets, boosting the business condition DI.
◆The DI of current business conditions for large non-manufacturers was +6 points, improving from the previous survey (+4) but short of consensus expectations (+8). DIs improved for business-related sectors (leasing, business services), benefitted by a turning around of manufacturer DIs. DIs were mixed for household-related industries—improvement in retailers and restaurants/accommodations, vs. deterioration in personal service providers.
◆FY13 sales and recurring profit were projected to increase 1.1% and 6.4% y/y (all industries, large companies). Higher growth projections by manufacturers drove overall projections. The FY13 forex rate is projected to be Y85.22/$ (large manufacturers), a stronger yen than the recent rate. Therefore, overseas sales could overshoot current projections, leading to an upgrade in recurring profit projections going forward.
◆The FY13 capex projection (incl. investment in properties but excl. that in software; all industries, large companies) was –2.0% y/y. Both manufacturers and non-manufacturers projected slides, down 0.7% and down 2.6%, respectively. The current production capacity DI was +6 points (all industries, all companies), flat from the previous survey, and the future DI was projected to improve (decline) to +4 points. The limited improvement means that corporate sentiment regarding production capacity remains on the cautious side.
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