Japan’s Q2 Tankan survey showed business sentiment holding firm despite intensifying trade tensions. While today’s Tankan beat won’t trigger immediate action, it keeps the door open for a BoJ hike policy shift before year-end, especially if trade risks stabilize.
Large manufacturers posted a headline index of +13, beating expectations of 10, and reaching the highest level since December 2024. Their forward outlook for September came in at +12, also topping forecasts of 9. The services side was more mixed. Large non-manufacturers remained steady at +34, meeting expectations, but this marked a softening from prior readings, with the September outlook dipping to +27.
Still, capital expenditure plans surprised to the upside: large firms projected FY2025/26 capex to rise 11.5% (vs. 10.0% expected), while small firms were slightly less pessimistic than forecast. The investment data points to continued confidence in the domestic recovery.
Inflation expectations remained broadly stable. Firms anticipate CPI to rise 2.4% over both one-year and three-year horizons—unchanged to slightly lower from the previous survey.
Full BoJ Tankan survey release here.
