The September Tankan survey showed improved manufacturing sentiment and earnings outlooks, while business conditions in consumption-related sectors remained cautious. Capital investment remained solid, although the outlook for the second half of the fiscal year remained cautious.
According to the September Tankan survey and data released on 1 October, manufacturing sentiment and earnings outlooks improved. The business conditions DI for large manufacturers rose from 22 to 24, while the DI for all manufacturers, regardless of size, improved from 14 to 19. By contrast, the DI for large non-manufacturers fell from 37 to 35, and business sentiment weakened in industries closely linked to consumption, such as retail, lodging and food services. The improvement in manufacturing stood out in the corporate sector, but caution remained overall.
Actual consumption trends also lacked strength. The Real Consumption Activity Index held up with a 1.0% quarter-on-quarter increase in the April–June quarter. On a monthly basis, it fell 1.5% in June and rose just 0.2% in July. The Statistics Bureau’s CTI-Micro for households of 2 or more people showed a 1.4% real increase in July, but a 2.2% decline year on year. These indicators suggest that the recovery in consumption remains limited.
A key focus is the improved earnings outlook for the first half of the fiscal year, led by manufacturing. The ordinary profit plan for the first half of fiscal 2026 for all sizes and industries calls for a 9.4% year-on-year increase, while the planned amount was revised up 16.9% from the June survey. Manufacturing profit growth is projected at 28.2%, driving the overall figure higher. By contrast, ordinary profit in the second half is planned to decline 4.8% year on year, making the extent to which the first-half improvement carries over into the second half a key focus.