Two consecutive months of improving manufacturer sentiment adds to the case for the BoJ to proceed with its projected tightening path, with chip-sector strength providing a demand-side cushion against broader geopolitical headwinds. The chemicals and electronics sub-indices leading the gains suggest semiconductor capital expenditure cycles remain intact, a positive signal for regional supply chains. However, the sharp expected deterioration in transport machinery sentiment to minus-13 in September, from plus-13 now, flags that automakers remain exposed to supply chain disruption risks that a US-Iran framework alone may not quickly resolve. Non-manufacturers’ forward guidance dropping to plus-19 from plus-32 introduces some caution on the domestic services outlook.
Japan’s Reuters Tankan showed manufacturers’ sentiment rose to +13 in June from +8, and non-manufacturers to +32 from +29, driven by semiconductor demand, though both sectors see softer outlooks ahead.
Summary:
Source: Reuters Tankan survey, June 2026
- The manufacturers’ sentiment index rose to +13 in June from +8 in May, a second consecutive monthly improvement, led by chemicals rising to +20 from +6 on semiconductor-related demand
- Non-manufacturers’ sentiment climbed to +32 from +29, with real estate and construction driving the gain
- Manufacturers expect sentiment to hold at +13 in September; non-manufacturers project a drop to +19, citing geopolitical risks and supply chain challenges
- Transport machinery, which includes Japan’s major automakers, forecasts a steep fall to minus-13 in September from plus-13, reflecting ongoing sourcing difficulties
- The survey was conducted June 3-12 across 215 responding firms out of 490 polled
- A potential formalisation of the US-Iran framework could support sentiment, but supply chain normalisation is expected to take time
Japanese business confidence improved across both manufacturing and services in June, with semiconductor-related demand driving the headline gains, though forward-looking indicators point to a more cautious second half, the latest Reuters Tankan survey showed.
The manufacturers’ sentiment index climbed to plus-13 in June from plus-8 in May, marking a second straight month of improvement and the strongest reading in recent months. The chemicals sector led the advance, with its index jumping to plus-20 from plus-6, as firms cited resilient demand from semiconductor customers despite an uncertain geopolitical backdrop. Electronics and machinery makers reported similar conditions, with order books bolstered by chip market activity.
Non-manufacturers reported sentiment of plus-32, up from plus-29 in May, with real estate and construction confidence contributing to the gain. Housing demand was described as steady despite rising input costs, with a pipeline of new projects supporting near-term activity.
The Reuters Tankan is a monthly leading indicator for the Bank of Japan’s quarterly Tankan business survey and is closely watched as a gauge of corporate conditions between official readings.
Forward guidance was more mixed. Manufacturers expect sentiment to remain flat at plus-13 in September, suggesting the current momentum is seen as sustainable but not accelerating. Non-manufacturers were more cautious, projecting a fall to plus-19, with firms pointing to geopolitical risks and supply chain uncertainties as drags on the outlook.
The sharpest divergence came from transport machinery, which encompasses Japan’s major automakers. That sector’s index is forecast to drop to minus-13 in September from plus-13 now, reflecting persistent difficulties in sourcing materials and ongoing disruptions to global supply chains.
A resolution of the US-Iran conflict, if formalised, could provide some relief to sentiment in coming months, but analysts cautioned that normalisation of shipping and supply chains would take time even under an optimistic diplomatic scenario.
