Japan: June manufacturing sentiment up on AI-driven demand

Research evidence excerpt

Japan: June manufacturing sentiment up on AI-driven demand

J P M O R G A N Japan Economic Research

17 June 2026

Japan: June manufacturing

sentiment up on AI-driven

demand

The June Reuters Tankan survey suggested that large firms’ business conditions Economic and Policy Research

remain firm. Sentiment among large manufacturers jumped 5 points to 13, defying Takuho Morimoto

our expectation for a decline. The rebound since April is likely supported by solid (81-3) 6736-6682

demand for AI-related materials and products. The three-month-ahead outlook takuho.morimoto@jpmorgan.com

index also improved sharply, rising to 13 from 5 in May, although supply JPMorgan Securities Japan Co., Ltd.

constraints and higher input costs remain a concern in several industries. Large

non-manufacturers likewise beat expectations, with sentiment up 3 points to 32—

its highest since January—potentially signaling resilient domestic demand. That

said, their outlook remains subdued, edging up only 1 point to 19.

The Reuters Tankan serves as a leading indicator for the BoJ Tankan, which will

be released on July 1. The survey points to a mild softening in manufacturers’

sentiment in 2Q: our monthly-data tracking implies a small decline from 12 to 11.

For non-manufacturers, our tracking points to a stable reading around 21. If

realized, this would indicate that business sentiment is holding up despite the

energy price shocks. However, monthly data suggest a more pronounced

deterioration in SME sentiment, implying that the gap between large firms and

SMEs could widen.

The improvement in manufacturing sentiment is concentrated in sectors benefiting

from AI-related demand. Chemicals rose 14 points to 20, and metals/machinery

climbed 21 points to 26.