Japan Manufacturers’ Mood Hits Over 4-Year High

The Reuters Tankan index for Japanese manufacturers jumped to +18 in March 2026 from +13 in February, marking its strongest level since December 2021, as a near-term rebound in industrial momentum was supported by robust semiconductor-related demand and a pickup across key manufacturing sectors. The improvement was broad-based, led by chemicals and petroleum-linked industries, where sentiment surged alongside stronger demand tied to the semiconductor cycle. Transport machinery, a core pillar of Japan’s export economy, also showed resilience amid solid vehicle production and healthy order books. Meanwhile, the steel and non-ferrous metals segment remained deeply negative due to weak demand linked to the auto sector. Looking ahead, manufacturers expect sentiment to ease to +14 by June, reflecting rising uncertainty from the Middle East conflict, elevated input costs, and external demand risks.

The Reuters Tankan index for Japanese manufacturers rose to +13 in February 2026 from +7 in January, marking the first improvement in three months, driven by firmer machinery orders and a weaker yen. Machinery producers recorded the sharpest gain, with their sub-index climbing to +15 from 0. One manager cited “a certain level of visibility for orders, sales, and profits,” while another noted that confidence was underpinned by the yen’s weak yet stable trajectory. A softer currency typically supports exporters’ earnings when overseas profits are repatriated. In contrast, sentiment in the transport machinery sector, which includes automakers and parts suppliers, deteriorated, with the index easing to +33 from +40. Respondents pointed to subdued domestic auto sales and tighter rare-earth export controls in China as key headwinds. Looking ahead, manufacturers expect overall sentiment to moderate to +10 over the next three months, suggesting caution despite the recent improvement.

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.