MNI: BOJ Tankan: Key Sentiment Rises, Solid Capex Plans

Japanese benchmark business sentiment rose slightly in September for the second straight quarter, while non-manufacturers’ sentiment remained flat, the Bank of Japan’s Tankan survey showed Wednesday.

The diffusion index for major manufacturers climbed to +14 from +13 in June, the highest since December 2024, though it is projected to ease to +12 in December. Sentiment among major non-manufacturers was steady at +34, but is expected to slip to +28 three months ahead.

For smaller firms, the index for manufacturers held at +1 in September and is seen dipping into negative territory at -1 by December. Sentiment for smaller non-manufacturers eased to +14 from +15 in June, with a further decline to +10 forecast. The diffusion index is derived by subtracting the share of pessimistic responses from optimistic ones.

A BOJ official told reporters that there are mixed responses from firms. Sentiment improved as firms transferred high costs to selling prices but also worsened due to high costs.

Despite the relatively upbeat readings, BOJ officials remain cautious as many firms have yet to fully account for the impact of U.S. trade policy on their outlooks. (See MNI POLICY: BOJ Sees No Need To Rush Rate Hikes)

The Tankan also showed that capital investment plans remain firm and supportive of domestic demand. Major firms expect spending to rise 12.5% this fiscal year, revised up from 11.5% in June and above the historical average. Smaller firms see capex falling 2.3%, an improvement from the -5.6% forecast in June, with a tendency for plans to be revised higher as the year progresses.