Japan Q3 Business Sentiment Hits 3-Quarter High

The Bank of Japan’s index for large manufacturers edged up to 14 in Q3 2025 from 13 in Q2, improving for the second straight quarter and marking the highest reading since Q4 2024, as a trade deal between Tokyo and Washington soothed concerns about U.S. tariffs. However, the latest result was below the market consensus of 15. Confidence was upbeat among firms producing textiles (4 vs 0 in Q2), chemicals (15 vs 14), ceramics, stone & clay (30 vs 17), general-purpose machinery (27 vs 23), production machinery (17 vs 15), electrical machinery (16 vs 11), shipbuilding & heavy machinery (36 vs 27), processed metals (0 vs -3), and motor vehicles (10 vs 8). At the same time, sentiment remained stable for business-oriented machinery (at 22) but fell for lumber & wood (-8 vs 0), petroleum and coal (0 vs 9), and iron & steel (-14 vs -3). Meanwhile, large firms planned to increase capital expenditure by 12.5% in Q3, after a 11.5% growth in Q1 and pointing to the strongest rise in seven quarters.