BOJ March 2014 Tankan Survey

◆In the BOJ March Tankan survey of corporate sentiment, business sentiment improved overall. A broad range of industries showed improvement, and this general sentiment appears to have spread to small to medium sized enterprises as well, hence confirming continued expansion of the economy. On the other hand, the outlook for the near future has met with a major downgrade. This is thought to be due to the reactionary decline following the increase in the consumption tax, and hence can be considered within the range of what had already been expected.

◆FY 2014 sales projections of major corporations in all industries see growth of +1.1% y/y. On an industry by industry basis, manufacturing industries see +1.2%. While the non-manufacturing industries are expecting +1.0%. Meanwhile, FY 2014 recurring profit projections of major corporations in all industries report -2.3% y/y. Profit projections divided between first half and second half of the fiscal year have both manufacturing and non-manufacturing industries expecting declines in the first half, moving to profit growth in the second half. Profits are expected to temporarily fall due to the reactionary decline expected after the increase in consumption tax, but then in the second half, a rapid rebound is seen.

◆The FY 2014 capex projection (incl. investment in properties but excl. that in software; all industries, large companies) was +0.1% y/y, in tune with market consensus (+0.0%). At the time of the March survey, it was the first time capex projections were positive since 2007. These numbers are more positive than those reported by the survey at the beginning of the fiscal year.