Tokyo – Business confidence among Japan’s biggest manufacturers rose in October to a level not seen in almost five years, according to a monthly Reuters Tankan poll. The index for manufacturers edged up to plus‑22 from plus‑21 in September, marking the highest reading since December 2021.
Strong semiconductor demand lifts manufacturing outlook
Confidence in the precision‑machinery sector, which supplies equipment for the semiconductor industry, jumped nine points to plus‑38. A manager at a precision‑machinery firm noted, “The semiconductor industry remains buoyant and order volumes have been running at 1.5 times normal levels for the past four months.” Another respondent from a machinery company highlighted strong orders and shipments for products serving the semiconductor market.
The metal‑products sector also rose nine points to plus‑35, and the steel and non‑ferrous metals sector surged to plus‑25 from minus‑13, reflecting broader optimism in heavy‑industry supply chains.
Non‑manufacturers face a tougher environment
In contrast, the sentiment index for non‑manufacturers fell to plus‑23 from plus‑29, the lowest level since November 2024. Food producers recorded the sharpest decline, dropping 15 points to minus‑40 as higher raw‑material costs and weak consumer spending squeezed profits.
Information and communications sentiment tumbled to plus‑8 from plus‑21, while retailers slipped to plus‑8 from plus‑18. Real‑estate and construction also weakened, moving to plus‑28 from plus‑37. A real‑estate manager explained, “Property investment has become difficult because of rising interest rates and construction costs.”
Wholesalers bucked the broader trend, rising to plus‑30 from plus‑24, helped by stronger demand for construction materials linked to disaster‑recovery projects.
Looking ahead
When asked about expectations three months ahead, manufacturers anticipate a modest improvement, forecasting the index to rise to plus‑23. Non‑manufacturers, however, expect their index to ease further to plus‑21.
Several manufacturers warned that while AI‑related demand is currently strong, it may eventually moderate. Service‑sector firms expressed concern that inflation is weighing on household purchasing power.
The poll, conducted from September 18 to October 2, gathered responses from 215 of the 508 firms surveyed. The indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones, with positive figures indicating net optimism.
These findings serve as a leading indicator for the Bank of Japan’s upcoming quarterly Tankan survey, offering insight into the health of Japan’s industrial base and the challenges facing its service sector.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
