Japan Big Maker Sentiment Improves for 3rd Straight Quarter

Tokyo, Dec. 15 (Jiji Press)–Business sentiment among large manufacturers in Japan improved for the third straight quarter, apparently because the impacts from the high tariff policy of U.S. President Donald Trump’s administration proved to be limited, the Bank of Japan’s “tankan” survey for December showed Monday. The headline diffusion index for large manufacturers’ current business conditions rose to plus 15 from plus 14 in the previous September survey, hitting the highest level since December 2021. The latest reading matched the average forecast among 16 economic research institutes surveyed by Jiji Press. The outcome is expected to be a tailwind for the BOJ, which is reportedly considering raising its policy interest rate at its two-day Policy Board meeting from Thursday. The continued rise in the most closely watched index in the central bank survey also reflected robust demand for semiconductors on the back of the expanding use of generative artificial intelligence as well as progress in companies’ efforts to pass higher costs on to their product prices. The result showed that the Japanese economy remains on a path of moderate recovery, analysts said. The DI shows the percentage of companies seeing good business conditions minus that of firms feeling the opposite. The current condition DI for the automotive industry came to plus 9, down from plus 10 in the previous September tankan, as the sector still remains cautious about the effects of the U.S. tariff policy. In contrast, the DI for the petroleum and coal product sector significantly improved to plus 33 from zero, thanks to receding uncertainty in the global economy from Trump’s tariffs. Sentiment among chemical makers and electric machinery producers also improved, aided by strong semiconductor-related operations. The food and beverage sector saw its DI climb to plus 9 from plus 6, as more companies in the sector were able to reflect rising costs in their product prices. Meanwhile, the current business condition DI for large nonmanufacturers came to plus 34, unchanged from September. Affected by consumers’ growing moves to cut spending in the face of higher prices, the DI for the accommodations, and eating and drinking service sector inched down to plus 25 from plus 26. Still, private spending continues to be solid, supported by higher stock prices and expectations for wage hikes, pundits said. The current business condition DI for small manufacturers rose to plus 6 from plus 1, up for the first time in three quarters and recovering to the level in March 2019, before the COVID-19 pandemic. The DI for small nonmanufacturers stood at plus 15, up from plus 14 and posting the first rise in four quarters. The business condition outlook DI toward March 2026 stood at plus 15 for large manufacturers and plus 28 for large nonmanufacturers. There are concerns among nonmanufacturers over a downturn in the number of foreign visitors to Japan following a rise in tensions between Japan and China. The latest tankan showed serious labor shortages in both the manufacturing and nonmanufacturing sectors, with the employment DI, or the percentage of companies with excess employees minus that of firms with a lack of employees, came to minus 38 for all surveyed companies, also including midsize firms, logging the worse level since August 1991. The average assumed exchange rate among all surveyed companies for fiscal 2025 stood at 147.06 yen per dollar, against 145.68 yen in the September tankan. Combined fiscal 2025 capital spending by large manufacturers and large nonmanufacturers is forecast to rise 12.6 pct from the previous year. END [Copyright The Jiji Press, Ltd.]