The Bank of Japan’s September 2026 survey shows large manufacturer sentiment rising to +24, even as non-manufacturing confidence cools. With rates at a 31-year high of 1.25%, companies are battling a weak yen and high energy costs. Global investors are tracking these results, as Japan’s shift away from low-interest rates influences liquidity and capital flows across international markets.
The Bank of Japan’s September 2026 Tankan survey shows a split in Japanese business confidence. Large manufacturers reported a sentiment index of +24, an increase from +22 in the previous quarter. This marks the sixth straight quarter of improvement for this sector, largely supported by demand for tech and AI-related products. However, the mood among large non-manufacturers cooled, falling to +35 from +37, which is the first decline in over a year.
This data comes as the Bank of Japan moves forward with its most aggressive monetary policy shift in three decades. The central bank raised its benchmark interest rate to 1.25% this year to manage inflation. While this helps normalize policy, it also increases the cost of borrowing for companies that have relied on near-zero rates for years.
The Impact of Import Costs
Japanese companies currently face a difficult mix of external pressures. The yen is trading near 160 against the US dollar, which makes importing raw materials significantly more expensive. With global Brent crude oil prices hovering near $98 per barrel, energy-dependent businesses are struggling to absorb higher production costs. The survey highlights that firms now expect inflation to remain sticky, projecting rates around 2.6% over the next three years.
Global Market Relevance
For global investors, the Tankan report is a crucial monitorable. Japan has historically been a primary source of low-cost capital for global markets. As the Bank of Japan continues to raise rates, the carry trade—where investors borrow cheap yen to invest in higher-yielding assets elsewhere—faces sustained pressure. Any further tightening by the central bank could reduce global liquidity, which in turn influences emerging markets and major currency pairs.
Beyond these short-term market dynamics, Japan faces deep structural challenges. An aging population and persistent labor shortages remain a drag on long-term productivity. While the private sector currently shows enough momentum to absorb the impact of rising rates and imported inflation, the economic outlook remains fragile. Investors will now look to upcoming central bank meetings to gauge whether additional rate hikes are planned for the coming months.