Japan's business sentiment worsens due to tariffs and China

Business sentiment in Japan has weakened in March 2025, according to a recent survey. The Reuters Tankan survey shows that manufacturers' confidence dropped to -1, down from +3 in February. This is the first negative reading for manufacturers in three months. Non-manufacturers also reported a decline. Their confidence index fell from +30 to +25. Rising costs for labor and transport are contributing to this downturn. Some companies mentioned a decrease in orders from China, prompting a shift in production to Japan and other countries, though overall sales growth remains limited. Looking ahead, there is a slight improvement expected for June. Manufacturers anticipate an index of +4, while non-manufacturers expect a reading of +28. The survey was conducted from March 5 to 14, involving 225 large non-financial companies. The Bank of Japan is set to release a statement today, with no significant changes to economic policy anticipated.