Reuters Tankan survey shows manufacturers’ confidence steady at +13 while services sentiment drops to +25 in July.
Japan’s manufacturers maintained steady confidence in July, with sentiment unchanged at plus 13, driven by strong demand for semiconductors and AI servers. The resilience in goods sector sentiment contrasts with weakening service sector confidence, which fell to plus 25 from plus 32 in June due to cost pressures and geopolitical risks tied to Middle East tensions.
The divergence adds complexity to the Bank of Japan’s policy calculus, as services firms express concerns over persistent inflation risks. Manufacturers anticipate a slight uptick to plus 14 in October, while non-manufacturers are expected to hold steady, offering no clear signal of imminent economic deterioration.
The survey, based on responses from 218 firms polled between July 1-10, highlights external demand as a key growth driver amid softer domestic service sector activity.