Tankan sentiment dips slightly, BOJ seen on hold
TOKYO (Reuters) - Japanese corporate sentiment worsened for the first time in a year amid growing concerns about the outlook for the U.S. economy and uncertainty over future oil price and yen movements, a Bank of Japan survey showed on Monday.
The closely watched March tankan survey did little to change the widespread view that the central bank will be slow in raising interest rates, with many traders expecting the next rate hike to come sometime after upper house elections in July.
The dollar edged a tad higher against the yen right after the tankan release but held mostly steady just below 118 yen. Investors in the Japanese government bond and stock markets largely shrugged off the survey.
The headline sentiment index for big manufacturers was plus 23, meaning those firms who think business conditions are favorable outnumbered those who think they are negative by 23 percentage points.
This was down from plus 25 in December and slightly below economists' forecasts of plus 24.
It was also the lowest level since June 2006 and the first time in a year for the headline index to worsen.
The diffusion index (DI) for June was seen at plus 20, showing big manufacturers, a key driver of Japan's economy, are less upbeat about conditions over the next three months.
Economists said firms have seemingly become more wary about a likely slowdown in the economy of the United States, Japan's biggest export destination, along with global stock market upheaval at the end of February and a slight rise in the yen.
"The decline in the headline figure reflects uncertainties in the outlook for the U.S. economy, foreign exchange rates and oil prices, despite firm domestic demand," said Takumi Tsunoda, an economist with Shinkin Central Bank Research Institute.
Broad weakness in the yen has helped Japanese exporters over the past year, keeping corporate profits at high levels. But volatility in global equities markets since late February had triggered some correction in the yen's declines.
CAPEX STILL SOLID
But overall, the tankan survey, conducted from February 23 to March 30, underscored that Japan's corporate sector remains healthy, adding to Friday's data showing firm household spending and smaller-than-expected declines in industrial output.
"The tankan was generally within expectations. The DI is already at a high level, so unless the big manufacturers' DI fell below plus 20 it won't have much impact on the markets," said Makoto Yamashita, chief JGB strategist at Lehman Brothers.
Chief Cabinet Secretary Yasuhisa Shiozaki said the government maintains the view that the world's second-largest economy is expanding moderately, with corporate sector activity firm.
Among non-manufacturers, whose overall sentiment index was unchanged from three months earlier, real estate firms who think business conditions are favorable outnumbered those who think they are negative by 53 percentage points, the highest level since February 1991. Continued...
