Japanese manufacturers’ confidence weakened sharply in October, led by a steep drop in sentiment among automakers hit by U.S. tariffs, higher costs, and slowing global demand, according to the Reuters Tankan survey.
The manufacturers’ index fell to +8 in October from +13 in September, its first decline in four months and the lowest reading since July. It is expected to ease further to +4 by January. The auto and transport machinery subindex plunged to +9 from +33, reflecting the sector’s exposure to U.S. tariffs of 15% under the Trump administration’s trade deal. The industry, which makes up roughly a third of Japan’s exports to the U.S. and employs about 8% of the domestic workforce, is also battling rising input costs for materials, labour, and energy.
Machinery and precision equipment firms similarly reported weaker sentiment, citing tariff burdens and softer demand from China. A manager at a machinery company said the additional costs from U.S. tariffs on steel and aluminium were weighing on the outlook.
The non-manufacturers’ index held steady at +27, with only a modest dip to +26 expected by January. Confidence among retailers improved, rising to +27 from +20, supported by better urban sales and a rebound in inbound tourism.
Overall, the survey—covering responses from 237 of nearly 500 major non-financial companies between September 24 and October 3—signals growing strain on Japan’s manufacturing sector and adds to expectations of an economic contraction of about 1.1% annualised in the third quarter.
