Tankan Survey

The release

How it is measured.

Companies of every size answer whether conditions are favourable, not so favourable or unfavourable. The diffusion index is the share answering favourable minus the share answering unfavourable, so zero is the neutral line. Results are given by size of company and by manufacturing and non-manufacturing; the figure most quoted is for large manufacturers. The survey also collects plans for investment, the exchange rate companies have assumed in their budgets, and their outlook for prices.

Why markets watch it.

It is conducted by the central bank itself, has a very high response rate and feeds directly into the Bank of Japan’s assessment of the economy. Companies’ investment plans and their expectations for prices are read alongside the bank’s own outlook.

How it is commonly misread.

Zero is neutral here, not 50, so its readings cannot be set beside a purchasing managers’ index. Investment plans follow a known pattern through Japan’s financial year, typically starting cautious and being revised as the year goes on, so a plan is compared with the same survey a year earlier, not with the previous quarter. The exchange rate companies report is the one they budgeted on, not a forecast.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.