In the September Tankan survey, sentiment among large enterprises improved 2 points from the previous quarter to plus 24, marking the sixth consecutive quarter of improvement. Supported by spillover from AI-related demand, supply and demand for nonferrous metals and production machinery remained firm, while capital investment plans rose 7.6% year on year. Sentiment among large non-manufacturing enterprises, which are driven mainly by domestic demand, was affected by factors that could lead to deterioration, making market confidence a prerequisite for stable growth.
According to the September Short-Term Economic Survey of Enterprises (Tankan) released by the Bank of Japan, the business conditions index for the representative group of large enterprises in manufacturing rose 2 points from the previous quarter to plus 24, improving for the sixth consecutive quarter. This was the highest level since March 2018.
The main driver was the spillover effect from AI-related demand. The index for nonferrous metals for data centers rose 9 points to plus 45, while production machinery, including semiconductor manufacturing equipment, improved 7 points to plus 43, remaining at a high level.
Capital investment remained firm, with capital investment plans for the current fiscal year expected to rise 7.6% from the previous fiscal year across all company sizes and industries.
However, the index for large enterprises in non-manufacturing, which are driven mainly by domestic demand, fell 2 points to plus 35, deteriorating for the first time in five quarters. Weather-related factors, including heavy summer rainfall, are thought to have affected accommodation and food services.
Overall sentiment is improving, but market stability is essential to achieving strong wage growth and economic growth, putting the BOJ's decision on interest-rate increases under scrutiny.