Key facts
- Japanese manufacturers' business confidence reached its highest level in nearly five years in October.
- The Reuters Tankan sentiment index for manufacturers rose to plus-22 in October.
- Non-manufacturers' sentiment fell to plus-23 in October, its lowest since November 2024.
- Food producers saw the sharpest deterioration in sentiment, dropping 15 points to minus-40.
- The poll surveyed 215 out of 508 firms between September 18 and October 2.
TOKYO, Oct 7 (Reuters) - Business confidence among big Japanese manufacturers rose in October to its highest level in nearly five years, buoyed by strong demand in the semiconductor industry, according to a Reuters monthly poll. However, sentiment among non-manufacturers deteriorated sharply amid rising costs and weakening consumer spending.
The Reuters Tankan sentiment index for manufacturers edged up to plus-22 from plus-21 in September, a level not seen since December 2021. Confidence in the precision machinery sector, which includes some chip-related equipment makers, jumped nine points to plus-38, with one manager noting that the semiconductor industry remains buoyant with order volumes running at 1.5 times normal levels for the past four months.
Sentiment in the metal products sector also rose nine points to plus-35, while the steel and nonferrous metals sector surged to plus-25 from minus-13. The poll, a leading indicator of the Bank of Japan's quarterly Tankan survey, received responses from 215 out of 508 firms between September 18 and October 2.
The non-manufacturers' sentiment fell to plus-23 from plus-29, its lowest level since November 2024. Food producers recorded the sharpest deterioration, dropping 15 points to minus-40 as higher raw-material costs and weak consumer spending squeezed profits. Sentiment in the information and communications sector tumbled to plus-8 from plus-21, while retailers fell to plus-8 from plus-18, and real estate and construction declined to plus-28 from plus-37. Respondents pointed to higher interest rates, elevated construction costs, and weaker household spending. Wholesalers bucked the trend, rising to plus-30 from plus-24, helped by stronger demand for construction materials linked to disaster-recovery projects.
Looking ahead, manufacturers expect sentiment to improve modestly to plus-23, while non-manufacturers see their index easing further to plus-21. Several manufacturers warned that strong AI-related demand may eventually moderate, while service-sector firms expressed concern that inflation was weighing on household purchasing power.