BOJ December 2021 Tankan Survey

◆The BOJ December 2021 Tankan survey of corporate sentiment improved in non-manufacturing in comparison to the previous survey, with business conditions DI (actual result) for large manufacturers at +18%pt, marking time at ±0%pt in comparison to the previous survey, and large non-manufacturers at +9%pt, up by +7%pt. This quarter’s survey indicates that with the resumption of economic activity, the leader in recovery of business sentiment has shifted from manufacturing to non-manufacturing.

◆Business conditions DI (forecast) for large manufacturers was at +13%pt (-5%pt in comparison with the current survey), while large non-manufacturers were at +8%pt (-1%pt). Most of the manufacturing industries are expected deterioration in business conditions. We can see from these results that corporations are deeply concerned about the recent increase in input costs causing Corporate Goods Price Index (CGPI) to rise sharply.

◆The FY2021 capex projection for all enterprises in all industries (incl. investment in properties, but not investment in software or research & development) is +7.9% y/y, at the same level as the previous survey. While large manufacturers at +12.4% saw a downward revision, this is actually smaller than the usual pattern seen in most years. The manufacturing industry overall shows a favorable outlook for the future, reflecting the global economic recovery. Most notable is the fact that small non-manufacturers (+2.3%) saw a downward revision, contrary to the pattern seen in most years. Caution is required regarding the possibility that capital investment will be restrained against the backdrop of deteriorating earnings associated with the prolonged restraint of economic activity.