Japan manufacturers' sentiment near 5-year high, service-sector mood slumps: Reuters poll
Business confidence among large Japanese manufacturers rose in October to its highest level in nearly five years, driven by robust chip demand. However, sentiment among non-manufacturers deteriorated sharply to its lowest since November 2024, as rising costs and weak consumer spending weighed on sec
TOKYO – Business confidence among big Japanese manufacturers rose in October to its highest level in nearly five years, while sentiment among non-manufacturers slumped to its lowest since November 2024, a Reuters monthly poll showed.
The Reuters Tankan sentiment index for manufacturers edged up to plus-22 in October from plus-21 in September, a level not seen since December 2021. The index is calculated by subtracting the percentage of pessimistic responses from optimistic ones, with a positive figure indicating net optimism.
Confidence in the precision machinery sector, which includes some chip-related equipment makers, jumped nine points to plus-38. “The semiconductor industry remains buoyant and order volumes have been running at 1.5 times normal levels for the past four months,” a manager at a precision machinery company wrote. Another respondent at a machinery firm cited strong orders and shipments for products serving the semiconductor market.
Sentiment in the metal products sector also rose nine points, to plus-35, while the steel and nonferrous metals sector surged to plus-25 from minus-13.
The non-manufacturers’ sentiment fell to plus-23 from plus-29, its lowest level since November 2024. Food producers recorded the sharpest deterioration, dropping 15 points to minus-40 as higher raw-material costs and weak consumer spending squeezed profits. Sentiment in the information and communications sector tumbled to plus-8 from plus-21. Retailers fell to plus-8 from plus-18, while real estate and construction declined to plus-28 from plus-37.
Respondents pointed to higher interest rates, elevated construction costs and weaker household spending. “Property investment has become difficult because of rising interest rates and construction costs,” a real-estate company manager wrote. Wholesalers bucked the broader trend, rising to plus-30 from plus-24, helped by stronger demand for construction materials linked to disaster-recovery projects.
The poll, a leading indicator of the Bank of Japan’s quarterly Tankan survey, was conducted from 18 September to 2 October and received responses from 215 out of 508 firms. Looking three months ahead, manufacturers expect sentiment to improve modestly to plus-23, while non-manufacturers see their index easing further to plus-21. Several manufacturers also warned that strong AI-related demand may eventually moderate, while service-sector firms expressed concern that inflation was weighing on household purchasing power.
