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

Business confidence among Japanese manufacturers climbed to its highest level in nearly five years in October, buoyed by strong chip demand, according to a Reuters monthly poll. The sentiment index for manufacturers rose to plus-22 from plus-21 in September, a level not observed since December 2021. The precision machinery sector saw a significant boost, with confidence jumping nine points to plus-38.

Semiconductor industry remains robust, with order volumes reaching 1.5 times normal levels for the past four months, a firm manager noted. Despite this, sentiment among non-manufacturers deteriorated sharply, falling to plus-23 from plus-29, its lowest since November 2024. Rising costs, weaker consumer spending, and higher interest rates were cited as key factors behind the decline.

The non-manufacturing sector includes various industries such as food producers, information and communications, retailers, and real estate, all of which reported deteriorating sentiment. Respondents attributed the decline to higher interest rates, elevated construction costs, and weaker household spending. While manufacturers expect sentiment to improve modestly over the next three months, non-manufacturing firms anticipate a further easing of their index to plus-21.