Japanese Manufacturing Confidence Reaches Four-Year High

Japanese manufacturing confidence reached a nearly four-year high in November, according to the latest Reuters Tankan poll. The surge was led by the electronics and auto sectors, benefiting from a weaker yen and solid orders. The monthly poll, in line with the Bank of Japan’s quarterly business survey, reported a manufacturers’ sentiment index of plus 17, the highest since January 2022, up from plus 8 in October.

In particular, the electronics sector subindex saw a significant increase to plus 25, the highest since December 2021, from plus 5 the previous month. Managers in the industry noted that the weak yen was boosting exports, with the currency down more than 5% against the dollar from the previous survey period.

The auto and transport machinery industry also experienced a substantial jump in confidence, with its index rising to plus 27 from plus 9, also attributed to yen weakness. Managers in this sector highlighted stable orders from customers as a contributing factor to the positive sentiment.

However, concerns were raised about a potential decrease in the overall manufacturers’ index to plus 15 by February. Some managers cited worries about sluggish auto production and sales. Companies such as Honda and Nissan have already revised their sales outlooks due to issues like component shortages and restructuring efforts.

Manufacturers expressed unease about the impact of global trade tensions, particularly with the tariff policies of U.S. President Donald Trump. Uncertainty surrounding demand due to these geopolitical challenges was a significant point of concern for businesses across various sectors.

On the non-manufacturing side, the sentiment index remained steady at plus 27, supported by high levels of tourism benefiting service industries. The outlook for February was also positive at plus 27, indicating a continued sense of optimism in the service sector.

Overall, the latest poll results indicate a buoyant mood in the Japanese manufacturing sector, driven by favorable external conditions and strong order books. Despite some apprehensions about future challenges, the current confidence levels suggest a positive outlook for the industry in the coming months.