Japan's Business Sentiment Seen Rising as AI and Semiconductor Demand Boosts Manufacturing

The Bank of Japan will release its September Tankan survey on October 1, and forecasts from 12 private-sector think tanks and other institutions point to a 4-point improvement in business sentiment for large manufacturers. The average forecast for the Business Sentiment Index (DI) is +26, which would mark a sixth consecutive quarter of improvement.

The prevailing view is that expanding demand tied to artificial intelligence (AI) and semiconductors will lift sentiment across the manufacturing sector. Dai-ichi Life Research Institute noted that AI and semiconductor-related demand is underpinning sentiment, with particular strength expected in sectors producing semiconductor manufacturing equipment and materials.

However, for automobiles, sluggish export volume growth could act as a drag on sentiment. A divergence in conditions across industries persists, with the overall manufacturing sector remaining on an improving trajectory but with non-manufacturers experiencing a 1-point deterioration in their DI reading to +36.