Japan: June Tankan survey

Research evidence excerpt

Japan: June Tankan survey

1 July 2026

Data Flash

By industry, the improvement in the business conditions DI for machinery-related

sectors was prominent,driven by growing AI-related demand. This is consistent

with the strong performance of related stocks in the current equity market. On the

other hand, the automotive sector's results were lackluster, indicating a growing

polarization of business sentiment across industries. In the non-manufacturing

sector, the accommodation and food services sub-sector showed a notable

improvement, despite signs that the number of inbound tourists may be peaking.

Capex plans are also robust. The capex plan for all enterprises and all industries for

fiscal year 2026 showed an 11.5% YoY increase, surpassing our forecast of +7.0%

and the market consensus of +10.9%. The strength in investment appetite among

non-manufacturers was a particular driver of the overall figure.

Price trends: Output price DI hits record high, inflation expectations also rise

The price-related indicators we were closely watching were strong across the

board.

The output (sales) price DI, which indicates firms' price-setting stance, rose by 12

points to +40 for large manufacturers and by 8 points to +40 for large non-

manufacturers. The large manufacturers' DI is now approaching its previous peak

of +41 from the December 2022 survey, while the large non-manufacturers' DI set

a new record high. Moreover, for SMEs, both the manufacturing and non-

manufacturing sectors also reached new record highs, showing that the move to

pass on costs is becoming more widespread. In particular, the significant rise in the

non-manufacturing output price DI, which is closely correlated with the CPI,

strongly suggests an impending acceleration in the CPI inflation rate (see Figure 5).