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Home » Technical Analysis » ForexLive » Central bank activity to watch for in the Asian timezone coming up this week -BOJ Tankan

Central bank activity to watch for in the Asian timezone coming up this week -BOJ Tankan

Posted by in ForexLive - June 29th, 2014 7:18 pm GMT

Coming up on Tuesday July 1st is the BOJ Tankan report

The ‘headline‘ figure of the BOJ Tankan is the big manufacturers ‘diffusion index’ (DI)

  • Expectations for the DI are, according to the survey you prefer – the median forecast from the Wall Street Journal’s survey of  of 16 economists is for a dip to 16; Reuters survey of 19 economists have the median forecast at 15
  • The DI for the previous survey was 17 
  • The expected dip in sentiment is due to the introduction of the higher sales tax on April 1
  • Despite the dip, sentiment is expected to improve going forward; the ‘Tankan Large Manufacturing Outlook‘ is expected to improve from the prior 8 to 18 (according to the Wall Street Journal poll of economists; the Reuters poll puts the expected for this at 17)

The non-manufacturing DI is forecast to fall to 20 (Wall Street Journal poll) or 19 (Reuters poll) from 24 prior

  • The non-manufacturing ‘outlook‘ DI is forecast to rise to 22 (Wall Street Journal poll) or 21 (Reuters poll) from 13 prior

Capex plans will also be a focus

  • Both Reuters and the Wall Street Journal surveys of economists expectations put Capex plans (capital spending plans for the fiscal year that began in April) at +6.0%, compared to just +0.1% in the prior survey

What to what for in the results:

  • In brief,  better headline DIs and/or capex would be a good sign of greater confidence that the April tax hike has been overcome and the economy is improving
  • recent indications from Bank of Japan (BOJ) Governor Kuroda are that the BOJ is ‘steady as she goes’ on monetary policy, so a reasonable result on the Tankan will further reinforce the idea that there is no further imminent action from the BOJ. No further easing expectations from the BOJ should be a positive input for the yen
  • having said this, its worth noting that Goldman Sachs is expecting more easing from the Bank of Japan (BOJ), in October. I tweeted this out back on Thursday, GS reckons inflation is going to stall (maybe it already has) and the BOJ will take further easing action in October:gs tweet
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