Business sentiment among Japan’s smaller non-manufacturing firms weakened at the start of 2026, according to the latest Tankan survey data released on 31 March 2026. The Tankan Small Non-Manufacturers Diffusion Index fell to 8 in the first quarter of 2026, down from 10 in the fourth quarter of 2025.
The decline suggests that smaller service-sector companies — a key component of Japan’s domestic demand — are turning slightly more cautious about business conditions. While the index remains in positive territory, indicating that optimists still outnumber pessimists, the slippage points to moderating confidence after the previous quarter’s stronger reading. Investors and policymakers will be watching upcoming quarters closely for signs of whether this softening sentiment turns into a more persistent trend in Japan’s non-manufacturing landscape.
