What the Indicator Shows
The Tankan asks companies, broken down by industry and by company size (large versus small and medium-sized), manufacturing versus non-manufacturing, about their own business conditions and their outlook. Among its components, the business conditions Diffusion Index (DI) is a widely watched representative measure that quantifies how companies feel about the economy.
Relationship to the Markets
The Tankan results are primary data aggregated from how companies themselves feel about business conditions, and they are also considered one input for the Bank of Japan's monetary policy decisions. That said, by the time the results are published, the market may have already priced in some of the expectations, so the results and subsequent stock price movement do not necessarily move in lockstep.