FX.co ★ Japan Business Sentiment Falls to 1-Year Low

Japan’s Business Survey Index (BSI) for large manufacturers unexpectedly slipped to -1.8% in the second quarter of 2026, down from 3.8% in Q1, marking the first negative reading since Q2 2025. The result came in well below market expectations of 4.2%, as sentiment was dampened by the conflict in the Middle East and a sharp rise in oil prices. Looking ahead, conditions are projected to improve, with manufacturing sentiment forecast to return to positive territory at 4.4% in Q3 and strengthen further to 5.8% in Q4. Compiled from a survey of major manufacturers, the BSI remains a key gauge of economic health in Japan, where industrial output plays a pivotal role.