Japan Manufacturers’ Mood Hits Near 4-Year High

The Reuters Tankan index for Japanese manufacturers fell to +7 in January 2026 from +10 in December, marking its weakest reading in six months as slowing demand from major economies weighed on materials heavy industries. Oil and ceramics saw one of the sharpest deteriorations, with sentiment dropping to zero, while steel slid deeper into negative territory and chemicals confidence also weakened. Firms pointed to subdued conditions across key export markets, with one steelmaker citing weaker Chinese demand for automotive related products. Others flagged softer consumer spending in the US and China, alongside the drag from tariffs on exports. Meanwhile, sentiment in autos and electronic machinery slipped only modestly, indicating parts of Japan’s industrial base remain more resilient than materials producers that are more exposed to the global cycle. Looking ahead, manufacturers expect confidence to recover to +10 by April.

The Reuters Tankan index for Japanese manufacturers fell to +10 in December 2025 from a near four-year high of +17 in November, as fiscal and growth concerns weighed on sentiment. Revised data showed that the economy contracted more than initially estimated in the third quarter. Prime Minister Sanae Takaichi’s large spending plans added to worries over Japan’s fiscal health, while expectations of a Bank of Japan rate hike this month further clouded the economic outlook. The steel and nonferrous metals sub-index dropped sharply to -33 in December from -11 in November, while the textiles, paper, and pulp sector remained flat for a second consecutive month. The monthly poll serves as a leading indicator for the BOJ’s quarterly Tankan survey.

The Reuters Tankan index for Japanese manufacturers rose to +17 in November 2025 from +8 in October, marking its strongest level since January 2022 as a weaker yen boosted global demand for cars and electronics. The electronics sub-index led the gains, surging from +5 to +25 on stronger chip-related orders and improved export competitiveness. The auto and transport machinery sector also rebounded sharply, climbing to +27 from +9 amid stable orders and currency tailwinds. Still, some firms cautioned that supply constraints and soft sales could limit momentum in the months ahead. The overall manufacturing index is projected to ease to +15 by February, with firms pointing to reduced output at major automakers such as Honda and Nissan, both recently lowering production targets. Business leaders also voiced concern that US tariffs and escalating trade frictions with China could weigh on exports.