BOJ Survey Suggests Easing Pressure for Further Rate Hikes

The Bank of Japan's (BOJ) tankan survey showed Japanese manufacturers' confidence reached an eight-year high in September, while non-manufacturers' mood soured.

The survey's headline index measuring big manufacturers' business sentiment rose to +24 from +22 in June, the highest since March 2018. This was largely due to strong global demand for chips and AI-related products, as well as improving profit margins.

However, big non-manufacturers' sentiment declined to +35 from +37 in June, the first decline in five quarters. Service-sector firms saw rising raw material and labor costs hit profits, while consumers shunned price hikes.

The survey showed companies forecast inflation at 2.6% within three years and 2.5% in five, signaling expectations of inflation beyond the BOJ's 2% target for a prolonged period. This may soften the chance of a back-to-back rate hike this month.