The Tankan index, which assesses the level of confidence in the Japanese economy among large companies in the processing industry, remained unchanged in October-December 2021 compared to the previous quarter, remaining at the level of 18 points, according to the data of the Bank of Japan.

Experts on average expected the indicator to rise to 19 points, Trading Economics reported. The consensus forecast of Quick’s respondents envisioned Tankan remaining at 18 points. The positive value of the index means that the percentage of respondents who consider the business environment favorable was higher than the share of those who do not think so. The value of the indicator at 18 points is the highest since the fourth quarter of 2018.

The fact that the current quarter’s Tankan was unchanged from the previous quarter shows that Japanese businesses remain cautious amid ongoing supply chain challenges and rising commodity prices. Increased optimism in October-December was noted among the oil refining and coal industries, as well as textile and machinery manufacturers. At the same time, the mood in metallurgical companies, as well as in the food and beverage industry, deteriorated.

Major Japanese companies plan to increase capital investment in the fiscal year ending March 2022 by 9.3%.

The previous survey expected a 10.1% increase in capital investment. Experts on average forecast a 9.8% increase in investment by large Japanese companies in the current fiscal year. The indicator assessing the current level of confidence of representatives of large non-manufacturing companies increased to 9 points in October-December from 2 points in July-September due to the removal of a significant part of quarantine restrictions. The average forecast of experts for this indicator suggested an increase to 6 points.

Tankan is calculated by the Bank of Japan quarterly based on the results of a survey of large Japanese companies and reflects the level of their optimism. The Central Bank attaches great importance to this indicator, as 99% of more than 10 thousand surveyed companies usually answer the questions asked, which allows to recreate a more complete picture of what is happening in the economy.