The March “tankan” survey results are not expected to lead to the BOJ's further acceleration of QE.

Generally, the tankan survey results were lower than expected. As mentioned in my March 23rd note, we were expecting that Japanese exporters would start to draw down their inventories, and increase production and investment as the volume of exports started to rise following the end of 2014.

It is not surprising that an improvement in business sentiment has been delayed particularly in machinery and equipment related sectors, because exports to Asia, including China, weren't that strong.

It would be unusual to see an aggressive capital expenditure program kick off at the start of a fiscal year, especially since the survey was only conducted at the end of the previous fiscal year. We therefore expect to see an upward adjustment in capital expenditures later.

An assumed exchange rate for FY2015 of 111.81 yen to the dollar is conservative so there is room for upward revisions in earnings forecasts. However, due to concern over foreign demand we can't say they are being “conservative as usual.”

There was an obvious degradation in the judgment of sales prices in the industrial material manufacturing industry. A weak sentiment over demand in the global economy driven by a decline in the price of crude oil may have caused worsening of overall sentiment in the manufacturing industry. On the other hand, current prices in non-manufacturing industries are increasing; and the deflationary mindset of the Japanese should continue to weaken.

Following the Chinese Lunar New Year, it may be difficult for exporters to determine appropriate inventory and production levels. Crude oil prices have stopped falling so companies will likely be revising their expectations. It's expected that when financial results are released in May and June, companies are likely to have more concrete expectations than they did in March about the business outlook for 2015. Investment decisions for production and sales related facilities as well as employment are not heading in the direction of more investment, which prompted our view that the BOJ will not accelerate its QE program at this point.