Japan manufacturers' mood hits near 5-year high, service-sector sentiment slumps: Reuters poll

Japanese manufacturers reported a surge in business confidence in October, reaching a near five-year high, according to a Reuters monthly poll. Meanwhile, sentiment among non-manufacturers declined sharply, hitting its lowest level since November 2024. The sentiment index for manufacturers rose to plus-22, up from plus-21 the previous month, the highest since December 2021.

This improvement was driven by robust demand for chips, with the precision machinery sector experiencing a significant jump in confidence, rising nine points to plus-38. Semiconductor industry experts noted that order volumes have been at 1.5 times normal levels for the past four months. However, the non-manufacturers sentiment dropped to plus-23, down from plus-29, primarily due to rising costs and weak consumer spending.

This decline was observed across various sectors, including food producers, information and communications, retailers, and real estate and construction. Respondents pointed to inflation, higher interest rates, and weaker household spending as key factors behind the decline in non-manufacturer sentiment. Looking ahead, manufacturers anticipate a modest improvement in sentiment to plus-23, while non-manufacturers are expected to see their index fall further to plus-21.