BOJ Tankan Survey Suggests Steady Economy Despite Rate Hike

The Bank of Japan's Tankan survey for September showed that business confidence remains steady despite last month's rate hike to a 31-year high. The quarterly Tankan is one of the BOJ's most-followed indicators, and this latest reading painted a resilient picture.

Big manufacturers' sentiment rose to +24 in September from +22 in June, while big non-manufacturers slipped to +35 from +37. Both figures are close to economists' forecasts and suggest that companies are not bracing for a sharp slowdown.

More importantly, the Tankan survey found that companies now expect inflation to run at 2.6% in three years and 2.5% in five years, above the BOJ's 2% target. This matters because inflation expectations can become self-fulfilling, with businesses more likely to lock in higher wages, prices, and contracts if they think prices will keep rising.