Reuters Tankan: Manufacturers sentiment index +2 in January (prior was -1)

Manufacturers sentiment index +2 in January

• -1 in December

Index for
non-manufacturers’ mood to +31

• was +30 in December

Both
manufacturers, non-manufacturers see no change in April

***

Japanese manufacturers’ sentiment improved in January, rising to +2 from December’s -1, driven by stronger conditions in materials industries like steel, oil, and chemicals. However, their outlook remains flat due to uncertainties over U.S. policies under Trump, particularly on trade and tariffs.

Key concerns include weak domestic demand, struggles in the auto and semiconductor sectors, and challenges in overseas markets like China and Southeast Asia.

The Bank of Japan (BOJ) views the improvement in business confidence positively, supporting its expectation for wage-driven growth and stable inflation near its 2% target, which could justify a rate hike as early as January 23-24.

The service sector also showed modest gains, with the index inching up to +31 due to steady domestic consumer confidence and increased tourism.

Despite some optimism, uncertainties over global trade policies and weak domestic factory output keep businesses cautious. Wage growth and moderate inflation are reinforcing expectations for a potential BOJ rate hike in the near term.

Bank of Japan Governor Ueda

This article was written by Eamonn Sheridan at www.forexlive.com.