TOKYO — Business confidence among major Japanese manufacturers reached its highest level in nearly five years in October, driven by robust global semiconductor demand, while sentiment among non-manufacturers fell sharply due to escalating operational costs.
The Reuters Tankan sentiment index for manufacturers rose to plus-22 in October, up one point from September's plus-21. It was the strongest reading since December 2021.
The precision machinery sector, which produces chip-related equipment, jumped nine points to plus-38. A manager at a precision machinery company said semiconductor orders have remained strong, with volumes consistently running 1.5 times normal levels over the past four months. A machinery firm manager cited robust orders and shipments for semiconductor-related products.
The metal products sector improved nine points to plus-35, while steel and nonferrous metals surged to plus-25 from minus-13.
Sentiment among non-manufacturers fell to plus-23 from plus-29, the lowest level since November 2024. Rising operational costs emerged as the primary challenge.
Food producers experienced the steepest decline, dropping 15 points to minus-40, as higher raw-material costs and subdued consumer spending squeezed profit margins. The information and communications sector tumbled to plus-8 from plus-21. Retailers' sentiment decreased to plus-8 from plus-18. Real estate and construction fell to plus-28 from plus-37.
Respondents in these sectors cited higher interest rates, elevated construction expenses and weaker household spending. A real estate company manager said property investment has become difficult due to rising interest rates and construction costs combined.
Wholesalers were an exception, with sentiment rising to plus-30 from plus-24, boosted by increased demand for construction materials linked to disaster-recovery projects.
Some manufacturers cautioned that strong demand driven by artificial intelligence applications may eventually moderate. Service-sector firms warned that persistent inflation continues to erode household purchasing power.
