Published quarterly by the Bank of Japan. Updated till the quarter of April-June 2017 (published on July 3, 2017).

Recent data trend:

According to the BoJ June Survey, the Tankan Business sentiment rose for the third straight quarter. Tankan which is a leading indicator of corporate profits, reiterates that manufacturers' profits have improved robustly by 70.3% YoY in the backdrop of a weak yen in the first quarter of 2017.

Large manufacturing business DI improved to 17 in June, the highest since March 2014, from 12 in the previous quarter. It exceeded a median forecast of 15 as surveyed by Reuters. On similar terms, large non-manufacturers' DI improved from 20 in March to 23, marking the highest level since Dec 2015. In comparison to the previous quarter, non-manufacturers' business DI has continued on its improvement and there seems to be lesser divergence among the industries.

On the surface, even though Japan's overall business sentiment seems buoyed on the back drop of historically high corporate profits and a depreciating yen, the rate of growth of capital investments continues to disappoint us. In our view, the trail of economic expansion is already in place, however, it is still largely dependent on the uncertainty in global economic outlook and exchange rates in the longer run. 

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. 

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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:  October 2nd, 2017