Japan Tankan: Big Manufacturers Hit +24, Prices Ease to 2.6%

Japan's September tankan survey, published by the Bank of Japan on 1 October 2026, showed the large manufacturers' sentiment index at +24, up from +22 in June but just short of the +25 median forecast in a Reuters poll of economists. The large non-manufacturers' index slipped to +35 from +37, against a +36 forecast. Firms now expect consumer prices to rise an average 2.6% a year from now, down from 2.7% in the previous survey.

Context — why the tankan matters for BOJ policy now

The tankan is the Bank of Japan's quarterly read on corporate conditions, and the September edition covers 9,104 companies, including 1,631 large firms, surveyed between 26 August and 30 September. The indexes measure the share of firms reporting favourable conditions minus those reporting unfavourable ones, so a +24 print means positive answers outnumber negative ones by 24 percentage points.

The headline large manufacturers' reading improved from June, but the improvement fell one point short of what economists had pencilled in. That gap matters because the Bank of Japan has signalled it is watching whether price pressures broaden beyond cost-push inflation.

The prior quarter's survey, published in June, had large manufacturers at +22 and large non-manufacturers at +37. Both of those levels were already elevated by the standards of the past decade, so the September data describe a plateau rather than a fresh acceleration.

A separate release of BOJ policy meeting opinions showed members open to faster rate hikes if inflation risks overshoot the 2% target. That framing puts the tankan's price expectations section at the centre of the policy debate, because it is the survey evidence on whether firms themselves expect to keep raising prices.

The yen has been a persistent input to that debate. Firms in the September survey assume the dollar will average around 154 yen this fiscal year, which is the level companies are using to plan import costs and export revenue.

Data — what the numbers show

The large manufacturers' index rose to +24 from +22, below the +25 forecast, and those firms expect +21 in December against a +22 forecast. Large non-manufacturers fell to +35 from +37, just below the +36 forecast, with a December outlook of +30 that matched expectations.

Smaller firms were the surprise. The small manufacturers' index rose to +14 from +9 in June, against a forecast of +11, and small manufacturers see +12 in December against a forecast of +7. Small non-manufacturers were unchanged at +15, in line with forecasts, and expect +10 in December, slightly above the +9 forecast.

Gauge	June	September	Forecast	December outlook
Large manufacturers	+22	+24	+25	+21
Large non-manufacturers	+37	+35	+36	+30
Small manufacturers	+9	+14	+11	+12
Small non-manufacturers	+15	+15	+15	+10

Capital spending plans were mixed. Large firms intend to raise investment by about 11% this fiscal year, a little below the roughly 12% forecast, while small firms plan to cut spending by about 5%, in line with forecasts. Large manufacturers expect recurring profits to rise by nearly 14%.

On prices, firms expect consumer inflation of 2.6% a year from now, 2.6% three years out, unchanged from the previous survey, and 2.5% five years out, down from 2.6%. Among large manufacturers, the net share reporting higher input prices eased to +59 from +62, while the output price reading held at +40.

Labour and financing conditions were little changed. The employment index for all firms was -38 against -37 in June, meaning far more firms report a worker shortage than a surplus. The financial conditions index for all firms was steady at +11. Large manufacturers' production capacity index moved to -2 from zero.

Analysis — what it means for markets and sectors

The combination of softer big-firm outlooks and firmer small-firm sentiment leaves room for different readings on how far the Bank of Japan can tighten. A central bank looking for evidence of broad-based price pressure can point to the small manufacturers' beat and to the employment index at -38, which describes a labour market tight enough to sustain wage growth.

A central bank worried about demand can point to the December outlooks. Both large manufacturers and large non-manufacturers expect their indexes to fall from current levels, and large firms' capital spending plans came in below forecast. That is a corporate sector planning for slower, not faster, conditions.

The input price reading is the pivot. It eased only to +59 from +62, which means a clear majority of large manufacturers still report paying more for inputs. The output price reading held at +40, so firms are still passing some of that through to customers. That mix gives the Bank little reason to change its view that price risks sit to the upside.

Currency-sensitive sectors carry the most exposure. Exporters across autos and capital goods plan around 154 yen to the dollar, and a weaker yen than that assumption raises import costs while flattering translated overseas revenue. Import-heavy retailers and utilities face the opposite arithmetic.

The limitation in this dataset is its timing. The survey window closed on 30 September, so it captures corporate views before any subsequent move in oil, the yen or global rates. One quarterly survey is a snapshot, and traders will weigh it against inflation, wage and oil price data before drawing conclusions about the pace of tightening.

Positioning reflects that ambiguity. Yen longs have a case in the employment and input price readings, while yen shorts can point to the softer December outlooks and the below-forecast capital spending plans.

Outlook — what to watch next

The Bank of Japan's next policy meeting is the immediate catalyst, where the board will weigh this tankan against the opinions already published showing openness to faster hikes. National inflation and wage data will test whether the 2.6% one-year expectation is being validated in realised prices.

On the currency, the 154 yen per dollar assumption is the reference level the corporate sector has budgeted around. A sustained move weaker than that raises the import cost channel that feeds the input price index, while a stronger yen relieves it.

December's tankan will be the next hard test of whether the large manufacturers' outlook of +21 and the large non-manufacturers' outlook of +30 are met or undershot. Capital spending execution through the fiscal year is the other line to track, given the 11% large-firm plan against the roughly 12% forecast.

Frequently Asked Questions

What does the tankan survey actually measure?

The tankan is the Bank of Japan's quarterly survey of corporate sentiment. Its diffusion indexes subtract the share of firms reporting unfavourable conditions from those reporting favourable ones, so a positive reading means optimists outnumber pessimists. The September survey covered 9,104 companies, including 1,631 large firms, between 26 August and 30 September, and it also collects capital spending plans, price expectations, employment and financial conditions.

Why did large non-manufacturers' sentiment fall while small manufacturers rose?

The large non-manufacturers' index slipped to +35 from +37, missing the +36 forecast, while small manufacturers jumped to +14 from +9, beating the +11 forecast. The report does not explain the divergence by sector. What it shows is that the weakness was concentrated among big services firms and the strength among smaller goods producers, which is the opposite of a uniform slowdown.