economic indicators

The Tankan Survey of Business Confidence


The Tankan (TANKI KEIZAI KANSOKU CHOUSA) is used as an indicator of short-term economic development as well as an indicator of long-term structural changes

The Tankan has its own characteristics due to various factors, such as the psychology of the respondents, factors peculiar to the industry or the size of the enterprise being surveyed. Not all users are aware that we can in fact isolate the results by business sector and enterprise size and in this way gain a better understanding of the nuances at play and increase the accuracy of economic forecasts. By focusing on the motor vehicle sector we aim to gather information relevant to this site.


The short-term Economic Survey of Enterprises in Japan (Tankan) is a statistical survey compiled and released quarterly by the Bank of Japan on the business conditions as perceived by enterprises and enterprises' business projections, with the aim of "contributing to the appropriate implementation of monetary policy by providing an accurate picture of business trends of enterprises in Japan." The population of the Tankan comprises approximately 210,000 private enterprises with capital of 20 million yen or more (excluding financial institutions) based on the "Establishment and Enterprise Census" conducted by the Ministry of Internal Affairs and Communications. The 11,283 sample enterprises in the September 2010 survey were chosen out of the population by industry and size according to certain criteria on statistical accuracy. The response rate stood at 98.9 percent (in the September 2010 survey). In principle, the survey results are released on the day following the last day of the survey period, which lasts approximately one month. The survey items include judgmental survey items, which seek qualitative information (such as the business conditions of enterprises discussed here) and annual projections items (such as earnings projections and fixed investment projections) and quarterly data items (such as the outstanding assets and liabilities).

It is characterized by:

1) accurate capturing of business trends among enterprises thanks to its high response rate;

2) speedy release;

3) numerous survey items which are capable of meeting various needs and

4) full time-series data.

The Tankan is highly regarded by statisticians, who include both business executives and economists at home and abroad, as an indicator of short-term business trends in Japan as well as an indicator of long-term trends and structural changes in the Japanese economy. As a result, the enterprises covered by the survey extend their cooperation, and the resulting high response rate, in turn, leads to the high accuracy in the Tankan. Thus, a virtuous cycle is at work.

This site will focus on the Judgment of Business Conditions index.

Method - Judgment of Business Conditions

The survey asks sample enterprises to choose one of the following three responses: "1. Favorable," "2. Not so favorable," and "3. Unfavorable" regarding the actual result (judgment at the time of the survey) and a forecast (for three months ahead) for "general business conditions, primarily in light of individual profits."

The number of enterprises choosing each response is simply aggregated and a diffusion index (D.I. = (percentage share of enterprises responding Choice 1) – (percentage share of enterprises responding Choice 3)) is calculated and released.

1) The Business Conditions D.I. (Actual Result)

The business conditions D.I. (actual Result) denotes information on the business conditions of enterprises at the time when the response is made (hereafter to be referred to as the actual business conditions D.I.). The actual business conditions D.I. has two main characteristics. First, it is highly linked to the latest trend in the business cycle. Compared with the peaks and troughs of the business cycle, the actual business conditions D.I. of large manufacturing enterprises has captured the turning points of the economy accurately. Second, it is highly correlated with the current profit-to-sales ratio of enterprises. This is consistent with the objective of the question, which is to find out how enterprises judge "general business conditions, primarily in light of individual profits." The result is generally not swayed by external factors such as share prices or the foreign exchange rate.

In sum, the actual business conditions D.I. is the survey item which most clearly demonstrates its strength in the Tankan. It is timely and moreover it captures the turning point of the business conditions and profit trends of enterprises in real time.

2) The Business Conditions D.I. (Forecast)

The business conditions D.I. (forecast) shows how enterprises look at their business conditions three months ahead (hereafter to be referred to as forecast business conditions D.I.). This information is important in forecasting a turning point of the economy or short-term economic fluctuations. However, due to unexpected developments during the following three months or the impact of the peculiarities, which will be described later, the forecast D.I. does not always accurately forecast the actual D.I. obtained in the survey conducted three months later.

The forecast business conditions D.I. of large manufacturing enterprises tends to be rather cautious when the economy is expanding, and somewhat bullish when the economy is contracting. Past data show that while the actual business conditions D.I. tends to be higher than the forecast D.I. in the previous survey in an expansionary phase of the economy, the reverse is true in a recessionary phase of the economy. Taking these past peculiarities into account, we may be able to assess the forecast D.I. more accurately.

Business Conditions (Diffusion index of "Favorable" minus "Unfavorable") in the motor vehicle sector.

A Lehman Brothers

B Tohoku earthquake

C BOJ quantitative easing

D Consumption tax increases

Small Enterprises

Medium Enterprises

Large Enterprises

Consumer Confidence Survey

The survey seeks to gain a quick understanding of shifts in consumer perception, expenditure plans on service, and the state of the possession and purchasing of principle consumer durables, as a tool in evaluating the direction of the economy. It covers an area of 34 million households in Japan, not including one-person households or foreigners and involves 5,040 households in 230 cities, towns and villages, sampled quarterly.

Consumer perceptions of the following five categories are surveyed: overall livelihood; income growth; prices; employment; willingness to buy durable goods. Respondents are asked to evaluate on a scale of one to five what they consider are the prospects for the five subjects over the next six months. Points are then allotted in accordance with the one-to-five scale for each category based on the anticipated effects on consumption. The consumer perception index is calculated by computing the weighted average of the points of the results (component ratio).

(excluding one-person households, seasonally adjusted series)