Large Japanese manufacturers reported better conditions in the Bank of Japan's September Tankan than they had predicted in June, but every size group expects the mood to cool by December. The index for large manufacturers rose 2 points to 24, against a June forecast of 17. For all firms in all industries it rose to 21 from 18, against a June forecast of 11, and the December forecast is 15.
The business conditions index subtracts the share of firms calling conditions "unfavorable" from the share calling them "favorable". The Bank of Japan's Research and Statistics Department published the survey on October 1, 2026. It covers 9,104 enterprises, with a 99.4% response rate, answering between August 26 and September 30.
Manufacturers up, nonmanufacturers down
The gains were concentrated in manufacturing. Medium-sized manufacturers rose 6 points to 23, and small manufacturers rose 5 points to 14. Nonmanufacturers moved the other way or stood still. Large nonmanufacturers slipped 2 points to 35, medium-sized ones fell 2 points to 24, and small ones held at 15.
The forecast column is where the mood sours. Large manufacturers expect 21 in December, and large nonmanufacturers expect 30. Medium-sized firms in both sectors expect declines of 5 points, and small nonmanufacturers expect 10.
| Group | June survey | September survey | December forecast |
|---|---|---|---|
| Large manufacturers | 22 | 24 | 21 |
| Large nonmanufacturers | 37 | 35 | 30 |
| Medium-sized manufacturers | 17 | 23 | 18 |
| Medium-sized nonmanufacturers | 26 | 24 | 19 |
| Small manufacturers | 9 | 14 | 12 |
| Small nonmanufacturers | 15 | 15 | 10 |
| All enterprises, all industries | 18 | 21 | 15 |
Profit and investment plans
Large manufacturers' current profits are forecast to grow 13.6% in the current fiscal year, which ends in March 2027. The BOJ's revision rate is +21.7%, calculated as the percentage change between the June and September survey figures. Large nonmanufacturers expect profits to fall 4.7%, with a revision of +1.8. Across all enterprises and industries, current profits are forecast to rise 2.2% on sales growth of 4.1%.
Fixed investment, including land purchases but excluding software and research spending, is planned to rise 7.6% across all enterprises and industries this fiscal year. Large firms plan 11.3%, with large manufacturers at 11.6% and large nonmanufacturers at 11.2%.
The split by size is wide. Medium-sized manufacturers plan growth of only 1.9%, after 13.8% in the previous year. Small firms across all industries plan a 4.7% cut, and small nonmanufacturers a cut of 8.4%, although the small-firm revisions are positive: +4.0 and +5.3 respectively.
Labor shortages and borrowing costs
The employment conditions index, which subtracts firms reporting insufficient staff from those reporting excess, stands at -38 for all enterprises, from -37 in June. Firms forecast -41 for December. Small enterprises report the tightest conditions, at -42 from -39, with a forecast of -45. Large enterprises stand at -29.
Firms also report a rising cost of credit. The loan interest rate index, which subtracts firms reporting falling rates from those reporting rises, climbed to 68 for all enterprises from 61 in June, and firms forecast 71 for December. Small enterprises moved from 61 to 70 and forecast 74. Large enterprises moved from 59 to 65 and forecast 67. Over the same period, the lending attitude index held at 13 for all enterprises, and the financial position index held at 11. The outline gives no explanation for the rise in loan rates.
Exchange rates and inflation expectations
Firms' exchange-rate assumptions are survey inputs, not market rates. All enterprises assume an average of 154.23 yen to the dollar for the current fiscal year, up from 152.57 in the June survey, and 177.86 yen to the euro, up from 175.62.
Inflation expectations were broadly steady. Across all industries, firms expect annual general price inflation of 2.6% one year ahead, from 2.7% in June, and 2.5% five years ahead, from 2.6%. Their expected change in their own output prices a year ahead eased to 3.5% from 3.7%.