Japan's Economic Indicator
BOJ June 2017 Tankan Survey

Business sentiment experiences pronounced improvement as expected, but influence on policy limited

July 03, 2017

  • Satoshi Osanai
  • Shunsuke Kobayashi


◆In the BOJ June 2017 Tankan survey of corporate sentiment, the current trend in business sentiment for all industries and corporations of all sizes has improved noticeably. Corporate sentiment regarding the future remains cautious, but considering recent improvements in the economic and financial environments, we believe there is no need for excessive concern. Our outlook for the Japanese economy sees a gradual improvement, and the June BOJ Tankan reflects that.

◆The business conditions DI for large manufacturers grew to +17%pt in comparison with last survey’s +12%pt, while at the same time exceeding market consensus at +15%pt. Overseas economies continue to recover, and the positive effects of a weaker yen since November 2016 continue to be felt, bringing the third consecutive quarter in improvement. Business conditions DI for large non-manufacturing industries improved at +23%pt in comparison to the previous survey at +20%pt, coming in right at the level expected by market consensus (+23%pt).

◆The FY 2017 capex projection for all enterprises in all industries (incl. investment in properties but excl. that in software; all industries, all companies) is +2.9% y/y, falling below market consensus (+3.9%). much focus was placed on the revision in research & development investment, which is a category whose publication just began as of the last survey. This amount was revised downwards slightly by large enterprises in all industries. Therefore future revision patterns should continue to be approached cautiously.

◆Employment conditions DI for manufacturing are expected to mark time, while non-manufacturing expects a small amount of growth (an easing of supply/demand stringency). However, in terms of level, employment very much retains its former condition of experiencing an excessive shortage of labor. This indicates that corporations still experience a major shortage of manpower. Employment conditions DI are expected to decline further in the future for enterprises of all sizes in all industries, with the condition of the labor market expected to remain tight.

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