Japanese manufacturing remains resilient — Q3 Tankan index rises to 14, with profit forecasts also improving

The latest Bank of Japan Tankan survey is attracting attention. The large manufacturing confidence index for the third quarter rose from 13 to 14, with the ceramics and shipbuilding industries leading the increase.

Key Points

Improvement in Business Sentiment

• Large manufacturing confidence index: 13 → 14 (upward)
• Large non-manufacturing index: steady at 34 (still solid)

Upward Revision of Investment and Profit Outlooks

• This year’s commercial investment growth rate: revised from 11.5% to 12.5%
• Decline in profits: narrowed from 4.9% to 4.7%

What’s Happening

This is the first Tankan survey since the Japan-U.S. trade negotiations concluded at the end of July and the Trump administration announced new executive orders. Market participants are increasingly expecting a rate hike by the Bank of Japan. However, Governor Ueda emphasized the need to monitor the impact of U.S. tariffs on corporate activity and profits—while no serious damage has been confirmed at this stage, uncertainty about the outlook remains.

Market Perspective: The improvement in corporate sentiment appears genuine, but the key focus moving forward is how far U.S. protectionist policies will spread.