The latest Tankan survey results in Q3 showcased strengthening corporate sentiment in Japan. Key indices and outlooks, along with projections for capital expenditure, underscore a robust business environment, as inflation expectations maintain steadiness.
Large Manufacturing Index showed notable gains from 5 to 9, marking its second consecutive quarter of growth. Concurrently, Large Non-Manufacturing Index advanced from 23 to 27, recording its best level since 1991 and marking its sixth straight quarter of improvement.
Further reflecting this positive trend, Large Manufacturing Outlook Index increased from 9 to 10, while its Large Non-Manufacturing Outlook saw an ascent from 20 to 21.
In terms of capital commitments, prominent firms revealed ambitious plans, with an anticipation to bolster capital expenditure by 13.6% for the fiscal year ending March 2024.
Regarding inflation, the corporate sector’s expectations remain consistent. Firms anticipate a price increase of 2.5% in the upcoming year, 2.2% over a three-year horizon, and 2.1% looking five years ahead. These figures mirror projections made in the prior quarter.
A crucial insight from a BOJ official noted that many large businesses have successfully offset higher costs by adjusting consumer prices, subsequently enhancing the overall business sentiment.
Further elevating the positive mood have been factors such as a resurgence in auto production and declining costs for raw materials. However, the official also acknowledged the challenges faced by some smaller enterprises, which have found it difficult to raise their prices.
