Japan's Business Confidence Reaches Eight-Year High Amid Mixed Economy Signals

Japanese business confidence reached an eight-year high in July-September, according to the central bank's survey, known as 'tankan'. The headline index measuring big manufacturers' business sentiment rose to +24 from +22 in June, the highest since March 2018. This improvement is attributed to strong global demand for chips and AI-related products, as well as improving profit margins.

However, non-manufacturers' sentiment declined to +35 from +37 in June, marking a five-quarter decline. Service-sector firms suffered from rising raw material and labor costs, falling sales, and the impact of typhoons and long periods of rain on restaurants and hotels.

Central bank officials note that corporate inflation expectations remain elevated but did not accelerate from three months earlier. Companies forecast inflation at 2.6% within three years and 2.5% in five, indicating expectations of inflation beyond the Bank of Japan's 2% target for a prolonged period.