BoJ Tankan: Japan Business Optimism Improves Despite Weak Yen and Oil Shock

The Bank of Japan’s latest Tankan survey showed stronger sentiment among large manufacturers, even as a weak yen, higher oil prices and long-term structural challenges continue to pressure the economy.

By All India Story

1 Oct 2026, 2:38 PM IST 2 min read

Bank of Japan Tankan survey shows improving Japanese business sentiment — Japan’s business sentiment improved despite pressure from a weak yen and higher energy costs.

The BoJ Tankan survey has offered a positive reading on Japan’s economy, with business sentiment among large manufacturers improving despite pressure from a weak yen, higher oil prices and rising import costs. The quarterly survey showed sentiment among large manufacturers rising to 24 from 22, while confidence among large non-manufacturers fell to 35 from 37.

The main business sentiment indicator improved for a sixth consecutive quarter, highlighting continued resilience among Japanese companies despite several economic challenges.

The Tankan is closely watched as an indicator of corporate conditions in Japan. It measures the difference between companies reporting favourable business conditions and those describing conditions as unfavourable.

Weak yen and higher oil prices remain challenges

The latest survey comes as Japan faces increased pressure from energy costs. Brent crude is trading at around $98 a barrel after previously reaching nearly $120. Prices remain well above pre-war levels of below $70, increasing costs for an economy heavily dependent on imported energy.

Japan has also continued to contend with a relatively weak yen. The US dollar has been trading near 160 yen, compared with around 110 yen five years ago. A weaker currency increases the cost of imported goods and energy, adding to inflationary pressure.

The Bank of Japan has raised its benchmark interest rate twice this year, in June and September, bringing it to 1.25%, its highest level in three decades. The moves are part of the central bank’s effort to normalise monetary policy after years of near-zero or negative rates.

Structural pressures remain

Despite the improvement in business sentiment, Japan continues to face longer-term economic challenges. An ageing population, labour shortages and concerns about future economic growth remain significant issues for policymakers and businesses.

Higher interest rates could theoretically provide support to the yen, but the currency remains under pressure. The combination of elevated energy prices, import costs and demographic challenges continues to complicate Japan’s economic outlook.

For now, the Tankan survey points to businesses maintaining a relatively positive outlook even as external shocks and structural pressures continue to test the economy.