Japan Reuters Tankan Index

Japan's manufacturers showed signs of optimism in January 2025, with the Reuters Tankan sentiment index rising to +2 from -1 in December. This improvement was largely driven by stronger conditions in materials industries, although manufacturers' outlook remains cautious due to uncertainty surrounding proposed policies from former President Trump. The most notable recovery in sentiment was observed in upstream sectors such as steel, oil refining, and chemicals, fueled by a pickup in global demand. However, sentiment in machinery sectors, including automotive and electronics, declined in January. Looking ahead, manufacturers' confidence is expected to remain steady, with the three-month-ahead outlook holding at +2 for April. Even among sectors that showed improvement, concerns lingered, with many respondents pointing to weak domestic demand in Japan. Several chemical industry leaders also expressed caution, citing challenges in local markets.