Japan's Tankan released today showed that the headline large manufacturers' business condition DI (Diffusion Index) declined to 23% in March from 25% in December. These same firms forecast that the DI would decline further in June to 20%. The DI for non manufacturing large firms, on the contrary, remained steady in March at 22% and forecast that it would rise to 22% in June. The first two charts compare the actual results and forecasts for large manufacturing and non manufacturing firms.

As noted in the JAPAN data base, major revisions in the Tankan survey have created a discontinuity in the series beginning with the first quarter of 2004. The old series is maintained by Haver as a DISCONTINUED series. While the two series are not comparable, the old series is useful in that it provides some perspective in which we can judge the recent data. We have plotted the actual conditions of large manufacturing firms in the new and the DISCONTINUED series. While the recent data are less robust than those of the nineties, they are significantly above those of the decade or so of sub par Japanese economic activity, as shown in the third chart.

Fixed investment expenditures by large manufacturing firms are forecast to increase more slowly, from 2.8% to 2.5%, in the current fiscal year; those by the large non manufacturing firms are set to increase 3.1% from 1.6% last year. The fourth chart shows in forecasted increases in fixed investment by large firms.