BNP Paribas: September Tankan Survey To Reveal Lesser Pessimism, Especially Among Manufacturers

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Friday, BNP Paribas in its preview on the Bank of Japan's upcoming Tankan Survey results for the September quarter said it expects confidence among companies to improve across the board as the nation's economic health appears to be improving.

The firm forecasts confidence among large manufacturers to improve to -40 in the September quarter compared to -48 in the previous quarter. Confidence among large non-manufacturers is expected to stand at -27 compared to -29 in the June quarter.

Among the smaller companies, confidence of small manufacturers is estimated to improve to -49 from -57, and confidence among small non-manufacturers is expected to read -42 compared to -44 in the preceding quarter.

The firm said that pessimism in the manufacturing sector is easing as manufacturers' ordinary profits and operating profits have improved since the first quarter, on the back of reviving exports, pent-up demand, improving terms of trade and the fiscal stimulus policies adopted by many nations.

Only a modest improvement in current conditions is expected for the non-manufacturing sector, mainly as a result of aggressive cost cutting by manufacturers. Despite the anticipated recovery of the manufacturing sector, the firm said there is little scope for sales to pick up robustly and hence spending has been curbed in an attempt to shore up profits. As a consequence of this, employment and income conditions in households have deteriorated and led to lower earnings in the domestic demand-dependent non-manufacturing sector.

Spending plans of manufacturers is expected to be extremely cautious because of overcapacity and the downshifting of growth expectations. Until recently, producers had beefed up production to cope with an export boom that was fuelled by the super weak yen. But the collapse of that export boom has left the manufacturing sector with an overcapacity, and as a result producers have sought to undo these excesses by shutting down production lines and closing factories.

Spending by non-manufacturers also remains cautious owing to the dim outlook on sales. Although overcapacity in the non-manufacturing sector is relatively limited, spending is expected to be severely constrained because of reduced earnings as a consequence of aggressive cost cutting by manufacturers.

Friday, BNP Paribas in its preview on the Bank of Japan's upcoming Tankan Survey results for the September quarter said it expects confidence among companies to improve across the board as the nation's economic health appears to be improving. (Market News Provided by RTTNews)