BOJ September 2022 Tankan Survey

◆The results of the BOJ September 2022 Tankan survey of corporate sentiment were as follows: business conditions DI (actual result) for large manufacturers were at +8%pt (-1%pt in comparison with the previous survey), while large non-manufacturers were at +14%pt (+1%pt in comparison with the previous survey). Looking at the breakdown of large manufacturers, the difference in direction was prominent amongst industries, with business conditions DI (actual result) for the processing industries marking time in comparison with the previous survey, while the basic materials industries worsening. Business conditions DI (forecast) for large manufacturers is at +9%pt (a difference of +1%pt in comparison with the current survey), with large non-manufacturers at +11%pt (-3%pt). Concerns regarding the future of business are growing amongst non-manufacturers.

◆Looking at Domestic Supply & Demand Conditions for Products and Services (actual result), both manufacturers and non-manufacturers worsened, with large manufacturers at 0%pt (-2%pt in comparison with the previous survey) and large non-manufacturers at -8%pt (-1%pt). The forecast also sees future deterioration with large manufacturers marking time and large non-manufacturers seeing -1%pt in comparison with the current survey. However, looking at the difference between sales price DI (forecast) and purchase price DI (forecast), we see an improvement, with a pause seen in the rise in purchase price followed by an expected continuation of growth in sales price.

◆The FY2022 capex projection for all enterprises in all industries (incl. investment in properties, but not investment in software or research & development) is +16.4% y/y. Looking at the projection by industry for enterprises of all sizes, manufacturers were at +21.2%, with non-manufacturers at +13.6%. In comparison with the average year, the extent of revisions was great, centering on large non-manufacturers. 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 infection 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.