Japan’s Reuters Tankan manufacturing index rose to +13 in September from +9 in August, the highest since August 2022, marking a third consecutive monthly improvement after the July U.S.–Japan tariff deal.

• Six of nine manufacturing industries saw improved sentiment, with transport machinery surging to +33 from +25, its strongest since December 2023 on solid order flows.

• Other sectors such as textiles, oil refining, and precision machinery weakened, with managers citing sluggish orders and lingering tariff effects.

• Manufacturers expect sentiment to ease slightly to +11 by December, reflecting cautious views on domestic demand and cost pressures.

• Non-manufacturing sentiment rebounded to +27 in September from +24, with real estate, retail, and transport improving, while wholesalers and IT reported weaker conditions.

• The non-manufacturing outlook was unchanged at +27 for December, suggesting stable confidence in services.

• Respondents pointed to persistent inflation and rising material and labor costs as drags on future sentiment, even as trade policy risks receded.

• Japan’s economy expanded +2.2% annualized in Q2 2025, supported by resilient domestic consumption despite global trade headwinds.