December 12, 2024 at 09:00PM
The Bank of Japan’s (BOJ) Tankan survey is a key indicator of business sentiment. Its scheduled for release on December 13, 2024. This quarterly report assesses the confidence levels of Japanese enterprises and provides insights into economic conditions.
This Tankan survey is particularly significant as it will inform the BOJ’s monetary policy meeting on December 18-19, 2024. Recent economic indicators suggest a complex backdrop:
Inflation: Japan’s core inflation has remained above the BOJ’s 2% target, with a 2.3% year-on-year increase in October. This persistent inflationary pressure has led to market expectations of a potential interest rate hike in December.
Economic Growth: The country’s economic growth for the third quarter of 2024 was revised upward to an annualized 1.2%, driven by higher capital investment and exports. However, a decline in private consumption highlights underlying fragility in the recovery.
Yen Depreciation: The weakening of the yen has increased import costs, contributing to inflation and adding pressure on the BOJ to consider rate adjustments.
The Reuters Tankan Index provides a monthly snapshot assessing Japanese business sentiment. Its shown notable fluctuations in recent months, manufacturing sentiment in a downtrend in October and December:
October 2024: The manufacturing sentiment index rose to +7, up from +4 in September, indicating increased optimism among manufacturers. However, the service-sector index declined to +20 from +23, marking the fourth consecutive monthly drop, with sectors like transport and wholesale experiencing the most significant declines.
November 2024: Manufacturing sentiment decreased to +5, reflecting growing concerns over China’s economic slowdown and persistent inflationary pressures. The service-sector index continued its downward trend, falling to +19, the lowest level since February 2023, influenced by rising costs and labor shortages.
December 2024: Manufacturing sentiment turned negative for the first time in ten months, with the index dropping to -1. This shift was attributed to worries about U.S. protectionist policies and the Chinese economy, leading to a more pessimistic outlook among manufacturers.
The case appears to be building for the Bank of Japan to remain on hold at its meeting next week:
BOJ reportedly sees little cost to waiting for next rate hike
BOJ reportedly erring towards keeping interest rates unchanged next week (The leaks keep on coming)
Goldman Sachs expect the Bank of Japan to remain on hold at 0.25% at the December meeting
This snapshot from the ForexLive economic data calendar, access it here.
The times in the left-most column are GMT.
The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.
This article was written by Eamonn Sheridan at www.forexlive.com.
