Large Japanese manufacturers reported their highest level of business optimism in over four years, despite challenges linked to the war in Iran. This information comes from the Bank of Japan’s quarterly Tankan survey, which assesses business sentiment among domestic companies.
The optimism index for large manufacturers rose to 17 in the first quarter of 2026, up from 15 in the previous quarter. This figure surpassed the 16 predicted by economists surveyed by Reuters. A reading above zero indicates that more businesses feel positive than negative about future conditions. This optimism is the highest since late 2021, as noted by data from LSEG.
Support for this positive outlook comes from strong profits that have offset rising energy costs, according to Carlos Casanova, an Asia economist at Swiss private bank UBP. Non-manufacturing companies also maintained a strong sentiment with an index of 36, matching the previous quarter and exceeding expectations of 33.
Following the survey’s release, the Nikkei 225 index rose by 4.48%, amid hopes that the war in Iran might soon end. Frederic Neumann, chief Asia economist at HSBC, attributed the upbeat business sentiment to Japan’s economy gaining momentum, bolstered by strong exports in early 2026.
However, experts caution that the survey may not fully reflect the conflict’s ongoing effects, as it closed in March. Neumann noted that the situation remains uncertain, especially with energy costs and supply chain disruptions rising. Meanwhile, Japan is already responding to the crisis by releasing oil stockpiles and providing fuel subsidies to mitigate the impact of the closed Strait of Hormuz. Japan relies on imports for over 87% of its energy needs.
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