Tankan Report (BOJ Tankan Survey) is a quarterly report published by the Bank of Japan since 1957. The report reflects business sentiment in the Japanese economy and is based on surveys of companies divided into four groups: small, medium, large, and industry leaders. Currently, approximately 9,000 companies are surveyed. It is one of the key indicators of economic activity in the country and significantly affects the yen (JPY), stock market, and monetary policy of the regulator.
Contents
- What data is displayed in the Tankan report
- Why the Tankan report is useful for the Bank of Japan
- How Tankan is calculated
- Structure of the report
- How the BOJ Tankan Survey publication affects the Japanese yen
- When the Tankan report is published
What data is displayed in the Tankan report
The Tankan report contains quantitative data on the following items:
- Business climate;
- Supply and demand in the manufacturing and investment sectors;
- Sales volume;
- Corporate profits;
- Production capacity and fixed investments;
- Labor conditions and employment;
- Taxation conditions.
This report provides important signals about the state of the Japanese economy, as Japan is one of the largest export countries, and the condition of its industry affects global markets.
Why the Tankan report is useful for the Bank of Japan
Quantitative data serves as the basis for diffusion indices calculated by the Bank of Japan:
- Business climate (favorable or unfavorable);
- Conditions of demand, inventory levels, employment, and production capacity (sufficient or insufficient);
- Financial conditions for businesses (relaxed or tightened);
- Credit conditions (favorable or harsh).
Diffusion indices are calculated as the difference between positive and negative opinions of surveyed companies. The Tankan report allows an assessment of business conditions in Japan.
How Tankan is calculated
The main indicator is the Business Sentiment Index (BSI).
BSI formula:
BSI = % of companies with positive expectations – % of companies with negative expectations
- If the index is positive → companies are optimistic, growth is expected.
- If negative → sentiments are deteriorating, economic slowdown may occur.
Tankan also includes forecasts for the next three months, making it a more valuable indicator for investors and traders.
Structure of the report
Tankan is divided into two main sections:
- Manufacturing sector (Large Manufacturers Index), which includes automotive, electronic, machinery, and chemical companies. It is important because Japan is the largest exporter of high-tech goods.
- Non-manufacturing sector (Large Non-Manufacturers Index). It covers trade, financial services, transportation, and hospitality, reflecting the state of domestic demand and the service sector.
Data on medium and small enterprises is also included in the report, but they are less significant for global investors.
How the publication of the BOJ Tankan Survey affects the Japanese yen
The publication of the Tankan report has a moderate impact on the market, so trading on news from this report is not recommended. The components of the report are leading indicators that mainly consider the spending plans of large companies in the coming months. The business environment reacts quickly to changes in market conditions, so changes in sentiments can be a signal of future changes in economic activity. Additionally, the report allows the Bank of Japan to adjust its monetary policy.
Strong Tankan data strengthens the yen, as investors expect an increase in BOJ interest rates. A weak report, on the contrary, can weaken the national currency, as BOJ may ease its policy.
For the stock market, an optimistic report supports the Nikkei 225 index and other Japanese stocks. Negative data can lead to selling on the exchanges. Moreover, it is important to note that Japan is the third-largest economy in the world, so its industrial sector affects global supply chains.
When is the Tankan report published
- Country of publication: Japan
- Publication date: Quarterly, usually in the middle of the current quarter, 7:50 EST
- Source: Bank of Japan
- Official website: www.boj.or.jp
- Market impact: Moderate
Key macroeconomic indicators for the Forex market
- Unemployment rate
- Nonfarm Payrolls (NP, NFP)
- ZEW Economic Expectations Index
- PMI Business Activity Index
- GDP Level (Gross Domestic Product)
FAQ
What is the Tankan Report?
The Tankan Report is a quarterly survey published by the Bank of Japan that measures business sentiment across different industries in Japan.
How does the Tankan Report affect the yen?
Strong Tankan data can strengthen the yen, while weak data may weaken it, as it influences investor expectations about the Bank of Japan’s monetary policy.
What sectors are covered in the Tankan Report?
The report covers both the manufacturing and non-manufacturing sectors, including large companies in automotive, electronics, finance, and other industries.
