BOJ June 2022 Tankan Survey

◆The results of the BOJ June 2022 Tankan survey of corporate sentiment were as follows: business conditions DI (actual result) for large manufacturers were at +9%pt (-5%pt in comparison with the previous survey), while large non-manufacturers were at +13%pt (+4%pt in comparison with the previous survey). Until the March survey, the economic recovery of overseas economies had been leading Japan’s economy with business conditions of large manufacturers improving faster than that of non-manufacturers. However, according to the June survey, while business conditions DI (actual result) for large non-manufacturers received a boost from the resumption of domestic economic activity, business conditions DI (actual result) for large manufacturers declined due to the effects of the lockdown in Shanghai and other factors.

◆Both large manufacturers and large non-manufacturers were influenced by the rising cost of raw materials, which caused input prices to rise. However, looking at the difference between output price DI (actual result) and input price DI (actual result), we see that non-manufacturers worsened, while manufacturers improved. This confirms that price pass-through of rapidly rising costs to output prices have been progressing recently, centering on manufacturers. And judging from the trend as seen in the DI (forecast), this tendency is expected to continue.

◆The FY2022 capex projection for all enterprises in all industries (incl. investment in properties, but not investment in software or research & development) is +14.1% y/y. Looking at the projection by industry, manufacturers overall were at +20.5%, with non-manufacturers (all enterprises) at +10.5%. In comparison to the average year, the extent of revisions was great, centering on large enterprises. Capex which had been planned for FY2021 but subsequently delayed has now appeared and this may have had a strong influence. We expect that the spread of COVID-19 in Japan and abroad will settle down, and expectations for progress in the normalization of economic activity will boost corporate willingness to invest in capex.