Overview
- The Reuters monthly Tankan, surveyed from July 1 to July 10, found manufacturers' sentiment steady at +13 while non-manufacturers' sentiment fell to +25 from +32.
- Factory optimism rests on a clear rebound in semiconductors, memory demand and rapidly growing orders for components used in chip applications and AI servers.
- Service firms cited higher energy and input costs, a weak yen, rising interest rates and fragile Middle East tensions as drivers of falling confidence.
- Japan's wholesale inflation jumped to 6.3% in May, evidence companies are passing higher energy costs to customers and prompting the central bank to voice caution.
- Economists and firms warn that sustained AI-driven export demand could strain capacity and supply chains while persistent cost pass-through would pressure BOJ monetary policy and household budgets.