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The Tankan survey, for those of you not in the know, is one of Japan’s most important economic releases. It’s a report designed to look into the current state of the top companies in the country and their respective outlooks for the next couple of quarters.

If you’re wondering why it’s such a big deal, it’s because the Bank of Japan (BOJ) itself relies heavily on the survey when it evaluates the economy and formulates it monetary policy. Plus, it’s only released four times a year: the first in April, the second in July, the third in October, and the last one in mid-December.

The report is composed of two main parts – one covers the manufacturing industry while the other covers the services or non-manufacturing industry. The index itself is actually pretty easy to read. It is based on a boom/bust scale, which prints a positive reading when the industries are experiencing growth and a negative reading when the industries are in contraction.

Earlier today, the October edition of the Tankan survey was published. According to the latest stats, the overall business mood for manufacturers turned gloomy in the third quarter as the manufacturing component of the survey fell to -3 from -1.

On the other hand, the services sector held steady as the non-manufacturing component remained at a reading of 8.

Both the manufacturing and non-manufacturing components were better than what the market had initially predicted, but the readings underlined the bleak economic outlook shared by the BOJ and many economists–growth is stagnant or on the decline.

Based on the results, the general consensus of the market is that growth will probably stall for most of this year and the next as weak demand in China and Europe take a toll on Japan’s export-dependent economy. In fact, in August, the country’s exports actually fell by a significant 5.8%. It marked the third straight decline, indicating a clear downward trend in exports.

This, together with the fact that Japanese exports have been getting less and less competitive due to foreign alternatives and the strengthening yen, implies that the export sector could weaken even further.

The disappointing data leads me to believe that we could see more easing from the BOJ. If you recall, the central bank just boosted their asset purchase program a couple of weeks ago by 10 trillion JPY, but with this new development, the BOJ may just have to expand its bond-buying program again this month. After all, there is still room for the BOJ to ease as the country’s inflation rate is still far off from its 1% target.