In a remarkable turn of events, Japan's Tankan Small Manufacturers Diffusion Index flipped from negative territory to a modest positive, as the figure reached 2 in the fourth quarter of 2025, compared to -1 in the previous period. This shift marks the first time since early 2023 that small manufacturers in Japan have reported a net positive sentiment, according to the latest data updated on December 14, 2025.
This positive trend signifies a growing optimism among small manufacturers, hinting at a potential recovery in Japan's manufacturing sector, despite the global economic turbulence. The Tankan index, which is a key gauge of business sentiment among small manufacturers, had been lingering in negative digits, reflecting prolonged challenges and uncertainty.
The diffusion index improving to 2 suggests better business conditions and more confidence among small-scale firms, driven possibly by domestic demand and stabilization in supply chains. Analysts view this uptick as a hopeful indicator of Japan's resilience and capacity for economic recovery amid ongoing global economic fluctuations. The forthcoming quarters will be critical in determining whether this positive shift will be sustained and further bolster Japan's economic landscape.
