Bad News -- but Not So Bad -- in Japan's "TANKAN" for March

The TANKAN Survey for March shows generally less favorable readings for Japanese business. But "less favorable that what?" News stories highlighted the so-called Headline Series, large manufacturing companies. These firms' results for March came at +14, well below December's +22 and also weaker than December's forecast value for March of +15. This is the lowest outturn since March last year, which was +12 and also the first time since the late 2003 reorganization of the TANKAN survey that these firms have fallen short of their own forecast from just three months prior. Thus, the "bad news" in the TANKAN report.

Other segments of Japanese business performed relatively better, however. Large nonmanufacturing firms did better at +11 than their forecast of +10 and they held steady with December's result of +11. Medium and small companies had less positive assessments of their business conditions than in December, but better than they were expecting. Medium-sized manufacturing firms, for example, saw a result of +6, considerably better than their projection of +2. The performance still slowed from December, but there was not as much deterioration as they had anticipated.

The mixed picture in the TANKAN survey follows similarly mixed readings in other measures of Japanese activity. Industrial production fell in February following a strong January gain, and services ("tertiary") activity also rose sharply in January. Unemployment ticked higher in February, but from a six-year low. Employment is very erratic, apparently struggling to establish a rising trend. The Japanese economy overall is struggling to establish a rising trend, and just as it seemed to be achieving that, much higher energy and raw material prices have acted to constrain those nascent gains.

A reminder that in the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling last March, we have segregated the recent detail data into new series in the "Japan" database. In summary data in the "G10" database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan's reorganization of the categories. This special linked series dipped back below 0 in this report to -2, after two quarters of small positive values. Even so, these past three quarters still constitute the best performance in this series since 1991.