Tankan Survey Strength is expected to highlight a slight recovery in Japanese business sentiment, particularly among large manufacturers. This comes as the Bank of Japan prepares to release its quarterly Tankan survey on October 1. Forecasts from multiple economic research institutes suggest that the diffusion index (DI) for current business conditions among major manufacturers will rise to plus 14. This marks a one-point increase from the June reading and reflects cautious optimism in the industrial sector.
However, expectations for the future are more tempered. Analysts project the outlook DI for manufacturers will slip by one point to plus 13.The decline stems from concerns over slowing global demand, particularly in export-driven industries. Nonmanufacturers face a slightly different picture. Experts expect sentiment among large firms in the service sector to dip by one point, reaching plus 33. While still high, the figure hints at a possible plateau in the boost from inbound tourism and domestic spending.
External trade developments have influenced sentiment. Recent U.S. tariff reductions on Japanese automobiles and auto parts have eased pressure on exporters. Nevertheless, some manufacturers remain wary, noting that other tariffs continue to hinder global competitiveness. Meanwhile, firms in processing industries and export-heavy sectors have expressed concern about rising costs and volatile demand. Nonmanufacturing companies, including those in hospitality and retail, report increasing challenges with labor shortages and high operating expenses.
The Tankan Survey Strength remains a vital data point for the Bank of Japan. As inflation hovers above the 2 percent target, the central bank closely monitors shifts in corporate confidence to adjust policy direction. Industry analysts say the survey’s results may influence future monetary decisions, particularly if business sentiment continues to strengthen. A consistent improvement could support gradual steps toward policy normalization.
Looking ahead, the manufacturing sector appears positioned for slow but steady growth. In contrast, the service sector must navigate headwinds like workforce shortages and fluctuating consumer demand. Overall, the upcoming Tankan report will provide insight into Japan’s economic momentum. While not a dramatic shift, the anticipated uptick in sentiment signals resilience in a changing global landscape.
