The Bank of Japan’s sentiment index for large manufacturers rose to 22 in Q2 2026 from 17 in Q1, beating market expectations of 16 and marking the strongest reading since Q1 2018. The improvement indicates that, for now, the economy has remained resilient despite the energy shock stemming from the conflict in the Middle East.
Business confidence strengthened among producers of lumber and wood (7 vs 0 in Q1), chemicals (20 vs 14), non-ferrous metals (36 vs 23), general-purpose machinery (38 vs 34), production machinery (36 vs 26), business-oriented machinery (23 vs 15), electrical machinery (29 vs 22), and shipbuilding (39 vs 35). Sentiment also rebounded in textiles (8 vs -5), and remained unchanged in food and beverages (steady at 9).
By contrast, confidence deteriorated in pulp (40 vs 44), ceramics (11 vs 25), and processed metals (11 vs 16).
Meanwhile, large firms now expect capital expenditure to increase by 11.5%, a sharp acceleration from 3.3% in Q1, which had been the weakest gain since Q1 2023.
