Bank of Japan Tankan

According to the BoJ December Tankan survey, the business condition for large manufacturers in Japan rose to 10 after remaining unchanged for the last three quarters at 6.

Published quarterly by the Bank of Japan. Updated till the quarter of October-December 2016 (published on December 14, 2016).

Recent data trend:

December BOJ Tankan showed that the moderate but consistent deterioration in the business condition in Japan since mid-2015 has stopped, at least for now. Large manufacturers' business condition DI improved from 6 to 10. As the chart below shows, the DI is well correlated with corporate profits and the improvement in December suggests that the corporate profits must have risen for manufacturers in the last quarter of 2016. 

Medium-sized and small-sized manufacturers also saw improvements in their business conditions. The underlying business condition may be even better, as manufacturers seem not to have adjusted their exchange rate assumption. According to the survey, large manufacturers are still assuming 103 yen per dollar in the second half of FY2016. Once they adjust their yen assumption, their profits outlook can be revised up significantly.  

Non-manufacturers seem less sanguine on their business conditions. Large non-manufacturers' business condition DI remained unchanged at 18. However, we do see a divergence among non-manufacturers. Among large-non manufacturers, industries such as transportation, communication and business services saw improvements in their DIs. On the other hand, industries such as retail, real estate, hotels and restaurants saw deterioration in the DIs. It seems it was inbound tourism/investment related industries that have prevented the business condition of overall non-manufacturers to improve in this quarter. Small-sized non-manufacturers seem to have had better quarter than their larger peers as they see their business condition to have improved, although quite marginally.

Brief overview of "Tankan"

Tankan is a short-hand in Japanese for Tanki Kansoku, meaning Short-term Observation. The statistics is officially named in English as "Short-Term Economic Survey of Enterprises in Japan". Tankan surveys a total of 10,000 companies on their various business conditions and the results are one of the speediest indicators for corporate earnings. As you can see from charts below, Tankan's quarterly business condition DI results have very high correlations with the operating profit for quarter and Tankan results are published well in advance of most corporate disclosure for the quarter. For this reason, Tankan results attract close financial market attention, although in recent years the results do not move the market as much as they used to. Besides business condition DI, Tankan includes a whole set of DIs such as employment condition DI that gives indication on corporations' need for additional hiring. 

For more information, visit the official government page

Corporate profit and Tankan DI (manufacturers)

Corporate profit and Tankan DI (Non-Manufacturers)

Employment condition DI for large and small companies

Output price change DI for Mfgs and Non-Mfgs

Business Condition DI by Industry

Source: BoJ, JMA

The Next Release Date:  April 3rd, 2017

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