BOJ December 2024 Tankan Survey
Results fail to provide supporting factor for additional interest rate hike by BOJ
December 16, 2024
Summary
◆The results of the BOJ December 2024 Tankan survey of corporate sentiment were as follows: business conditions DI (actual result) for large manufacturers were at +14%pt (+1%pt change in comparison with the previous survey), while large non-manufacturers were at +33%pt (-1%pt in comparison with the previous survey). The improvement for large manufacturers depended largely on the rapid recovery experienced in certain sectors, and when this is subtracted from the total, overall business sentiment is far from showing clear signs of improvement.
◆Looking at the breakdown of large manufacturers, business conditions DI (actual result) improved significantly for petroleum & coal products where price pass-through appears to have made progress. Motor vehicles showed limited improvement (+1%pt in comparison with the previous survey) despite the effects of the typhoon at the end of August having run their course. As for large non-manufacturers, business conditions DI (actual result) worsened for retailing (-15%pt) and accommodations, eating & drinking services (-12%pt), both industries which are easily influenced by inbound demand.
◆Looking at recent pseudo terms of trade (the difference between output prices judgment DI and input prices judgment DI), large companies in both manufacturing and non-manufacturing industries continue to improve. This is due to the continued slowdown in the pace of increase in purchase prices as the impact of cost-push inflation caused by soaring import prices weakens. Overall, the results of this survey are unlikely to provide support for the Bank of Japan to raise interest rates further in December.
◆The FY2024 capex projection for all enterprises in all industries (incl. investment in properties, but not investment in software or research & development) is +9.7% y/y. This is a slightly higher revision rate for a December survey, and can be considered a solid result. In addition to the renewal and capacity expansion investments that companies had been postponing due to the Corona crisis and rising prices, it is thought that there is also a build-up of demand for labor-saving investments to deal with the shortage of manpower.
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