Shoppers at a supermarket in Tokyo. Japan’s key August consumer inflation data due in coming weeks is expected to show the core consumer price index (CPI), which includes oil products but excludes fresh food prices, slipping 0.1% from a year earlier.

Reuters/Tokyo

Japanese business confidence was expected to worsen in the three months to September and consumer prices were expected to slip for the first time in more than two years, a Reuters poll found.
Recent bleak economic data and fears of a flow-on effect from China’s economic slowdown, coupled with global market turmoil, were seen to dampen business sentiment as firms worried about the pace of recovery after the economy contracted in the second-quarter.
In the Reuters poll of expected results from the Bank of Japan’s tankan survey, big firms were expected to cut their capital spending plans slightly in the current fiscal year to March versus proposed spending three months ago, but they are likely to maintain a solid level of investment.
The Bank of Japan’s quarterly tankan business sentiment survey was expected to show the headline index for big manufacturers’ sentiment declining by 2 points from three months ago to plus 13, the poll of 20 economists showed, which would be the first deterioration in four quarters.
“Although our main scenario is Japan’s economy will pick up gradually, exports and factory output are stagnant and recovery in private spending is delayed,” said Satoshi Osanai, economist at Daiwa Institute of Research.
“Firms are expected to show their cautious views for the outlook due to slowdown in the emerging economies including China and the global financial market wobble.”
The poll also found the big non-manufacturers’ sentiment index was expected to hit plus 20, down three points from the level seen three months ago.
Big firms were expected to raise their capital spending plan by 8.7% in the current fiscal year, according to the poll, which would be slightly down from their previous plan to boost capex by 9.3%.
The BoJ will publish its tankan survey at 8:50 am on October 1 (2350 GMT September30).
The Reuters Tankan, which closely tracks the BoJ’s tankan survey, showed this week Japanese manufacturers’ confidence slumped the most in a year in September to an eight-month low and is forecast to worsen further.
The monthly Reuters Corporate survey also showed nearly three quarters of Japanese manufacturers were worried China’s economic slowdown and the financial market turmoil it triggered would hit their profits this year.
The key August consumer inflation data due in coming weeks is expected to show the core consumer price index (CPI), which includes oil products but excludes fresh food prices, slipping 0.1% in August from a year earlier.
It would be the first year-on-year fall since it declined 0.4% in April 2013 when the BoJ governor Haruhiko Kuroda, launched a massive bust of monetary stimulus.
In July, core CPI was unchanged.
“Although many have already expected core consumer prices would fall around summer, if the headline shows actual falls, hopes for more stimulus by the BoJ could increase because of the weak economy,” said Takeshi Minami, chief economist at Norinchukin Research Institute.