Japan business mood improves, tankan survey shows

Tokyo - Japanese manufacturers' confidence surged to an eight-year high in July-September, but the mood of non-manufacturers weakened, according to a central bank survey. The mixed picture of the economy may reduce the likelihood of consecutive rate hikes this month. The tankan survey, which measures corporate sentiment, indicated that corporate inflation expectations remained elevated but did not increase.

The survey's positive outlook for manufacturers derives from strong global AI demand and reduced supply constraints, while service-sector firms experienced rising costs and falling sales. The BOJ governor emphasized elevated inflation expectations as a factor in his decision to raise the policy rate to a 31-year high last month.

Inflation expectations for the next three and five years were slightly lower than three months earlier, suggesting that inflation expectations did not rise enough to warrant immediate rate hikes.