Japanese business sentiment shows mixed trends in March Tankan

The Diffusion Index (DI) for business conditions among large Japanese enterprises across all industries rose to 27 in March 2026, a slight improvement from 25 recorded in the December 2025 survey.

This indicates a marginal increase in current favorable sentiment.

However, the outlook for the coming months shows a weakening trend, with the forecast DI dropping to 21. Within manufacturing, the DI increased to 12 from 11, but its forecast fell to 7. Non-manufacturing saw its DI edge down to 21 from 22, with a forecast of 13. This mixed picture suggests that while current economic conditions are perceived as somewhat resilient, businesses are becoming more cautious about the near-term future.

The survey, which gathered responses from 9,209 enterprises, underscores a prevailing sense of uncertainty regarding future demand and overall economic activity in Japan.

The Tankan survey highlights persistent inflationary pressures.

Output price DIs for all enterprises are 28 for manufacturing and 32 for non-manufacturing, with forecasts rising to 33 and 40 respectively.

Input prices show robust upward trends, with DIs at 46 for both sectors, forecasting increases to 52 and 53. This suggests businesses anticipate higher costs.

Sales forecasts for large enterprises in FY2026 are modest, at 1.5 percent for manufacturing and 1.4 percent for non-manufacturing.

Current profit forecasts are subdued, with manufacturing expecting a 2.1 percent decline and non-manufacturing a 2.6 percent increase.

Fixed investment plans for FY2026 indicate a significant slowdown, with large manufacturing forecasting 2.7 percent growth, a sharp drop from 12.3 percent in FY2025.