The headline index for big manufacturers’ sentiment fell by 3 points to plus 12, marking the first deterioration in three quarters and roughly matching a median market forecast, the BOJ’s quarterly business sentiment survey showed on Thursday.
“The Tankan results indicate that Japan’s outlook remains grim”, said Yuichi Kodama, an economist at Meiji Yasuda Life Insurance in Tokyo.
Adding to the optimism expressed by non-manufacturing firms, business spending expectations soared over the quarter.
Large industry capex for the current fiscal year is now seen higher by 10.9%, well above forecasts for an increase of 8.7% and up from 9.3% expected in the second quarter.
Japan s factory output contracted 0.5 percent on-month in August, official data showed on Wednesday, as a slowdown in China weighs on exports.
The outlook came in with a score of 10, matching forecasts but down sharply from 16 in the three months prior.
Big manufacturers based their plans on an assumption that the yen will average 117.39 per dollar. “Additional easing by the Bank of Japan next month looks all but inevitable”.
The previous Tankan report showed sentiment among major manufacturers had improved to the highest level since March 2014, just before the government raised Japan’s sales tax. 7, while that of inventories was up 0.4 percent to 114.1.
“Weak factory output and today’s tankan won’t be enough for the BOJ to ease policy soon”.
Mr Abe on September 24 pledged to expand the world’s third-largest economy by 20% without elaborating on how and by when.
Tsuyoshi Ueno, a senior economist at NLI Research Institute, predicted the Bank of Japan would fire off more stimulus early next year.
Despite the sharp uplift recorded, like large manufacturers, sentiment towards the December quarter moderated, falling to +19 from +21 reported previously. “I want to see decisive deregulation and structural reforms”.
October 1 Japanese stocks rose on Thursday, taking comfort from surveys showing contractions in China’s manufacturing activity may have bottomed out and on pockets of strength among Japanese firms despite the crunch felt by weak external demand.