Japan Q2 Business Confidence Highest Since 2018

The Bank of Japan’s sentiment index for large manufacturers climbed to 22 in Q2 2026 from 17 in Q1, beating market forecasts of 16 and reaching its highest print since Q1 2018. The upturn suggested that the economy has, for now, remained resilient despite the energy shock triggered by the Middle East conflict. Confidence strengthened across firms producing lumber & wood (7 vs 0 in Q1), chemicals (20 vs 14), non-ferrous metals (36 vs 23), general-purpose machinery (38 vs 34), production machinery (36 vs 26), business-oriented machinery (23 vs 15), electrical machinery (29 vs 22), and shipbuilding (39 vs 35). Also, sentiment rebounded in the textiles industry (8 vs -5), while it was flat for food & drinks (at 9). In contrast, confidence fell in industries producing pulp (40 vs 44), ceramics (11 vs 25), and processed metals (11 vs 16). Meanwhile, large firms expect capital expenditure to increase by 11.5%, accelerating from 3.3% in Q1, which had marked the weakest rise since Q1 2023.

The Bank of Japan’s sentiment index for large manufacturers edged up to 17 in Q1 2026, beating market estimates of 16 and marking the highest level since Q4 2021. The uptick suggested Middle East conflict risks have yet to dent business morale. Confidence strengthened across firms producing pulp (44 vs 40 in Q4), electrical machinery (22 vs 21), processed metals (16 vs 10), general-purpose machinery (34 vs 27), production machinery (26 vs 16), motor vehicles (13 vs 9), and business-oriented machinery (15 vs 9). Meanwhile, sentiment held steady in iron & steel (-15), food & drinks (9), and shipbuilding (35). On the other hand, weaker readings came from textiles (-5 vs -4), lumber & wood (0 vs 7), petroleum (18 vs 36), and chemicals (14 vs 19). Simultaneously, large firms plan to lift capital expenditure by just 3.3% in Q1, sharply down from 12.6% previously and the softest rise since Q1 2023, reflecting high borrowing costs and intensifying geopolitical uncertainty.

The Bank of Japan’s sentiment index for large manufacturers edged up to 15 in Q4 2025 from 14 in Q3, improving for a third quarter and marking the highest print since Q4 2021, amid the yen’s sustained weakness and firm global demand, notably from the AI sector. The latest reading matched market estimates, with confidence remaining upbeat among firms producing lumber & wood (0 vs -8 in Q3), pulp (34 vs 26), petroleum (33 vs 0), iron & steel (-11 vs -14), food & drinks (9 vs 6), chemicals (22 vs 15), electrical machinery (17 vs 16), shipbuilding (41 vs 36), and processed metals (8 vs 0). At the same time, sentiment stayed stable for textiles (at 4), general-purpose machinery (at 27), and production machinery (at 17), but fell for motor vehicles (9 vs 10), and business-oriented machinery (13 vs 22). Large firms planned to lift capital expenditure by 12.6% in Q4, after a 12.5% rise in Q3, topping forecasts of 12%. This was the strongest rise in investment intentions in eight quarters.