Japan Business Sentiment Improves in August

Business sentiment among Japan’s largest manufacturers improved in August 2026, supported mainly by continued strength in semiconductor-related industries. The Reuters Tankan manufacturing index climbed to +18 from +13 in July, reaching its highest level since March.

Semiconductor Demand Supports Manufacturing

Technology-related industries led the improvement, reflecting continued demand for electronics and semiconductor investment.

• The chemicals sub-index increased to +33 from +23.
• Metals and machinery sentiment rose sharply to +25 from +12.
• Transport equipment remained unchanged at zero, pointing to a more mixed outlook for the automotive industry.

The figures suggest that semiconductor demand continues to provide an important source of support for Japan’s manufacturing sector, even as conditions remain uneven across industries.

Services Sentiment Also Improves

Confidence outside manufacturing also strengthened during the month. The non-manufacturing index increased to +28 from +25, supported by resilient domestic consumption and relatively firm activity across service industries.

Despite the stronger August readings, manufacturers remain somewhat cautious about the months ahead. The manufacturing sentiment index is expected to ease to +16 by November, indicating that businesses are not yet convinced the recent improvement will be sustained.

Overall, the August survey points to firmer business conditions across much of the Japanese economy, with semiconductor-related demand and services providing the strongest support.