Japan Big Maker Sentiment Improves for 4th Straight Quarter

Tokyo, April 1 (Jiji Press)–Business sentiment among large manufacturers in Japan improved for the fourth straight quarter, supported by solid demand related to artificial intelligence, including semiconductors and data centers, the Bank of Japan’s “tankan” survey for March showed Wednesday. The headline diffusion index for large manufacturers’ current business conditions rose to plus 17 from plus 16 in the previous December survey. The latest figure compared with a median forecast of plus 16 from 15 economic research institutes surveyed by Jiji Press. The improvement also reflected the declining impact of the high tariff policy of U.S. President Donald Trump’s administration. On the other hand, concerns are growing that business sentiment could worsen due to rising tensions in the Middle East. The DI shows the percentage of companies seeing good business conditions minus that of firms feeling the opposite. The latest survey employed a new standard that revised the sample of companies surveyed. Given that most responses to the latest survey were collected on March 12, weeks after U.S.-Israeli attacks on Iran, a BOJ official said the full impact of tensions in the Middle East had not been factored into the March tankan. Among large manufacturers, the current business conditions DI improved in nine of the 16 industries surveyed. Driven by strong chip-related demand, the DI rose for nonferrous metals makers, production machinery makers, and ceramics, stone and clay products makers. In contrast, the DI for petroleum and coal products makers fell to plus 18 from plus 36 and that for chemicals makers declined to plus 14 from plus 19, due to rising crude oil prices amid the tensions in the Middle East. Meanwhile, the DI for large nonmanufacturers came to plus 36, unchanged from the December tankan. The DI for the accommodation and food services sector grew to plus 34 from plus 16 after higher costs were passed on to customers. Pressured by rising labor and fuel costs, the DI deteriorated for the transport and postal service sector and for electricity and gas suppliers. The DI for small manufacturers stood at plus 7, unchanged from the December tankan, while that for small nonmanufacturers fell to plus 16 from plus 17, the first decline in two quarters. Some companies expressed concerns over the difficulty in procuring rare earths amid deteriorating Japan-China relations. The business condition outlook DI toward June stood at plus 14 for large manufacturers and at plus 29 for large nonmanufacturers, with both sectors bracing for deterioration reflecting worries over their earnings amid rising energy prices. The average assumed exchange rate among all surveyed companies for fiscal 2026 stood at 150.10 yen to the dollar. Combined fiscal 2026 capital spending by large manufacturers and large nonmanufacturers is projected to increase 3.3 pct from the previous year. The BOJ will hold a two-day policy-setting meeting from April 27, when it is expected to examine whether to raise its policy interest rate after analyzing economic and price developments reflected in the latest tankan survey results. END [Copyright The Jiji Press, Ltd.]