FX.co ★ Japan Business Sentiment Deteriorates Further in Q2

Japan's Business Survey Index (BSI) for major manufacturing firms fell to -4.8% in the second quarter of 2025, down from -2.4% in the previous quarter. This decline unexpectedly countered market forecasts, which had anticipated a rise to 0.8%, marking the lowest point since the first quarter of 2024. The decline highlights escalating challenges facing Japan's export-reliant economy, which is currently grappling with new trade barriers put in place by U.S. President Donald Trump. In early April, the U.S. implemented extensive reciprocal tariffs, beginning with a 20% levy on Japanese products and a 25% tax on auto imports, before moving to a uniform 10% tariff on all nations except China. The BSI, derived from a survey of large Japanese manufacturers, is an essential indicator of economic health in a nation that depends heavily on industrial production. Despite the present downturn, manufacturers remain hopeful for the coming months, forecasting a significant recovery to 5.7% in the third quarter and 8.4% in the fourth quarter.