The Reuters Tankan Index provides a monthly snapshot assessing Japanese business sentiment ahead of the Bank of Japan’s quarterly report. For Q2 2025, the data shows:
- April 2025: Japanese manufacturers’ sentiment rebounded to +9 in April from -1 in March, marking the highest level since August 2024. This improvement was attributed to a temporary boost in orders. However, the outlook remained cautious due to concerns over U.S. tariffs and weak demand from China. The service-sector index rose to +30 from +25 in March, driven by optimism in real estate and information services, though shipping firms expressed concerns over rising labor costs and declining volumes amid escalating Sino-U.S. trade tensions.
- May 2025: In May, the manufacturers’ index edged down to +8 from April’s +9, indicating a slight dip in business confidence. Companies cited uncertainty surrounding shifting U.S. tariff policies and concerns over China’s economy as key risks. The service-sector index remained steady at +30, with the transport sector experiencing a temporary lift due to increased vehicle production, though the overall outlook remained cautious.
- June 2025: June saw a further decline in manufacturers’ sentiment to +6 from May’s +8, marking the second consecutive monthly drop. The weakening sentiment reflects growing caution among firms amid ongoing U.S. tariff uncertainties and subdued Chinese demand. The service-sector index held steady at +30, supported by active IT investments and inbound tourism, though rising labor costs and shortages weighed on some businesses.
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The Bank of Japan Tankan is due at 2350 GMT / 1950 US Eastern time.
I posted this description of the report earlier, ICYMI.
The term “Tankan” is short for “Tanshin Kansoku,” which roughly translates to “Short-term Economic Observation”.
- its published quarterly by the BOJ and is a closely watched economic indicator
- the BoJ surveys thousands of Japanese firms of all sizes, across a wide range of industries
- questions are focused on firms’ current business conditions and their expectations for the coming quarter and year
- covering aspects such as production, sales, profits, investment in plant and equipment, employment, prices, and more
The headline(s) to to the report are diffusion indexes, which reflects the difference between the percentage of firms that are optimistic about business conditions and those that are pessimistic.
- a positive reading suggests that more companies are optimistic, while a negative reading indicates more pessimism
The report is segmented into “large manufacturers,” “large non-manufacturers,” “small manufacturers,” and “small non-manufacturers” so as to help provide insight into different sectors of the economy.
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