Japan Business Confidence Hits Eight-Year High Amid Persistent Inflation Fears

Japanese business confidence has reached an eight-year high, according to a central bank survey published on October 1. The Bank of Japan's 'tankan' survey showed that big manufacturers' sentiment index reached +24 in September, up from +22 in June and the highest since March 2018.

The optimism was driven by strong earnings as manufacturers were able to pass on higher costs to customers due to resilient demand and growing pricing power. Companies forecast inflation at 2.6% in three years and 2.5% in five, indicating expectations of persistent inflation beyond the BOJ's 2% target.

The survey results are likely to reinforce the BOJ's view that inflation will remain high, leaving little room for easing its vigilance against rising prices. The BOJ raised its policy interest rate to a 31-year high last month, and its governor signalled that the bank has entered a phase focused on preventing inflation from overshooting its target.