Brown Brothers on Tankan Report

April 1st, 2014 7:22 am | by John Jansen |

Via Mark Chandler of Brown Brothers:

  • First, Japan’s Tankan survey generally showed improvement, but slightly less than the consensus expected.  For example, the much followed sentiment among large manufacturers improved to 17 from 16.  This is the highest since 2007, but fell shy of the 19 the consensus forecast.  
  • Evident in the details was a degree of pessimism, and this is really the take away.  Capex among the large companies is expected to increase 0.1% in the fiscal year that begins today.  The last Tankan survey in December showed a 4.6% increase.  Profits were expected to fall 2.3% this year after a 28% rise last year.  Projections for the June survey were lower than expected.    Moreover, the Japanese economy unexpectedly lost momentum in February.  As we learned yesterday, industrial output fell 2.3% in February.  The market had expected a 0.3% increase.   We learned last week that the overall household spending fell 2.5% y/y in February.  The market had expected a 0.1% increase after 1.1% in January.  
  • The controversial retail sales tax increase (from 5% to 8%) goes into effect today.  The economy was losing momentum prior to it, and this is of some concern to the Japanese government.  Finance Minister Aso said last week that the government will expedite this year’s spending.  Although the decision is unlikely before late in the year, the next leg of the retail sales tax (to 10%) may very well be deferred.
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