Japan's Large Manufacturers See Sentiment Soar to Nine-Year High

The Bank of Japan's September Tankan survey is expected to show large manufacturers' sentiment at its highest level since 2017, driven by strong demand for semiconductors and data centers due to the rapid development of artificial intelligence.

Sentiment among non-manufacturers, however, may slow down slightly due to rising costs caused by higher inflation, weak yen, volatile energy prices, and increasing interest rates.

The Tankan diffusion index for large manufacturers is forecasted to reach 25 in September, matching the highest level seen in December 2017. The DI has been steadily improving since March 2009 and has increased consecutively for six surveys.

Capital expenditure plans among large firms are expected to rise by 12.1% from a year earlier in the September survey, while smaller firms may revise their spending plans upward to minus 4.8% in September from minus 8.3% in June.