FX.co ★ Japan Manufacturers’ Sentiment Improves for 2nd Month

In August 2025, the Reuters Tankan index for Japanese manufacturers rose to +9, signifying the second straight monthly increase, following +7 in July and +6 in June. This uptick in confidence is attributed to a trade deal between Tokyo and Washington, which resulted in reduced US tariffs on cars and other goods to 15% in return for a Japanese investment package worth $550 billion consisting of equity, loans, and guarantees. Nevertheless, despite this current positive sentiment, the index is predicted to decline to +4 over the upcoming three months, as manufacturers exercise caution regarding the potential consequences of US tariffs. This cautious outlook is particularly evident in the transport machinery sector, which encompasses Japan's vital auto industry. Here, sentiment leapt to +25 in August from +9 in July, yet it is anticipated to drop back to +9 by November.