Japan business sentiment weakens in March amid tariff and China concerns

Reuters Tankan survey for March 2025

– Manufacturers’ sentiment drops to -1 in March from +3 in February
– Non-manufacturers’ index declines to +25 from +30
– Outlook improves slightly for June, with manufacturers seen at +4 and non-manufacturers at +28

Business confidence among Japanese manufacturers turned negative for the first time in three months, reflecting concerns over U.S. tariffs and a sluggish Chinese economy, according to a Reuters Tankan survey. The manufacturers’ sentiment index fell to -1 in March from +3 in February, marking the lowest level since December.

The non-manufacturers’ index also weakened, slipping from +30 in February to +25 in March, as rising labour and transport costs weighed on sentiment.

Some firms reported that orders from China had declined, leading to a shift in production to Japan and other overseas locations, though sales gains remained limited.

Despite the current weakness, sentiment for June is slightly more optimistic, with manufacturers expecting an index of +4 and non-manufacturers forecasting +28.

The survey was conducted between March 5-14 by Nikkei Research, covering 225 large non-financial companies.

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Reuters Tankan is a monthly survey that seeks to track the Bank of Japan’s tankan quarterly survey

• respondents spoke on the condition of anonymity
• Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading means optimists outnumber pessimists.

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The Bank of Japan statement is due today, no change to policy is expected:

• Economic calendar in Asia Wednesday, March 19, 2025 – Bank of Japan Day!

This article was written by Eamonn Sheridan at www.forexlive.com.