Japanese business confidence improved in the three months to September, with stronger sentiment among large manufacturers pointing to continued economic resilience despite the impact of the Middle East conflict.
The Bank of Japan’s quarterly Tankan survey showed the headline index for large manufacturers rose to +24 in September from +22 in June, although it fell short of the +25 expected by markets.
Sentiment among large non-manufacturers, meanwhile, eased to +35 from +37 three months earlier, also below the +36 market forecast.
The figures will be closely watched ahead of the BOJ’s quarterly growth and inflation forecasts later this month, which could provide further clues on the timing of its next interest rate increase.
The central bank raised its policy rate to a 31-year high in September, with Governor Kazuo Ueda signalling a greater focus on preventing inflation from remaining above its 2% target for too long.
The Tankan survey showed companies expect inflation to remain elevated, forecasting consumer prices to rise 2.6% over the next three years and 2.5% over five years.
The outlook suggests businesses expect inflation to remain above the BOJ’s 2% target for an extended period, a factor that could influence the central bank’s approach to further monetary tightening.
The survey also indicated that Japan’s economy has so far remained relatively resilient despite the disruption caused by the Middle East conflict.
