TOKYO - Business confidence among major Japanese manufacturers rose to 24 in September from 22 three months earlier, helped by strong demand related to artificial intelligence and semiconductors as well as improved earnings, the Bank of Japan's Tankan survey showed Thursday.
The sentiment index measuring confidence among companies such as those in the auto and electronics sectors improved for the sixth consecutive quarter but fell short of the average market forecast of 26 in a Kyodo News tally.
The key index is expected to fall to 21 in three months, according to the survey.
"Many companies have made progress in passing higher costs on to customers," a BOJ official said at a briefing.
Companies also continued to cite higher costs and weaker business sentiment as negative effects of the situation in the Middle East.
"At the same time, there have been signs that some of those effects are easing, including a pause in rising market prices and less difficulty in procuring raw materials," the official said.
Industries such as chemicals, ceramics and stone products, steel, nonferrous metals and electrical machinery reported improved business conditions amid increased demand for AI and semiconductors.
Business conditions worsened in industries such as pulp and paper, food products and automobiles, affected by the fragile Middle East situation.
The index for large nonmanufacturers, including service-sector companies, fell to 35 from 37 in the previous survey in June, its first decline in five quarters. It is forecast to worsen further to 30 three months ahead.
Japanese companies expect the U.S. dollar to trade at 154.23 yen in fiscal 2026 from April, up from 152.57 in the previous survey in June.
The latest data will be among the materials assessed at the BOJ's next policy meeting, scheduled for Oct. 29-30.
Inflation expectations across all industries fell 0.1 percentage point to 2.6 percent one year ahead, remained unchanged at 2.6 percent three years ahead and fell 0.1 point to 2.5 percent five years ahead.
Large manufacturers expect their net profit for the current fiscal year to rise 14.4 percent from the previous year, while major nonmanufacturers expect a 7.3 percent decline.
The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.
The central bank surveyed 9,104 firms, with 99.4 percent responding between Aug. 26 and Wednesday.
