Japanese manufacturers are slightly more optimistic despite Trump tariff worries

Key Points

• Sentiment among large Japanese manufacturers rose to +13 in the Bank of Japan’s quarterly tankan survey, up from +12 in March.
• Despite improved sentiment, firms remain concerned about President Trump’s tariffs, including 25% auto duties and 50% steel and aluminum levies.
• The Bank of Japan has held its benchmark rate at 0.5% since the start of the year and is expected to maintain ultra-low rates, with any hikes likely delayed until next year.
• A weaker yen, trading near 140 per dollar, has increased import costs but continues to boost exporters’ yen-denominated earnings.

TOKYO (AP) — Business sentiment among large Japanese manufacturers has improved slightly, according to a survey by Japan’s central bank released Tuesday, although worries persist over President Donald Trump’s tariffs.

The Bank of Japan’s quarterly tankan survey said an index for large manufacturers rose to plus 13 from plus 12 in March, when it marked the first dip in a year. The survey is an indicator of companies foreseeing good conditions minus those feeling pessimistic.

Major manufacturers include auto and electronics sectors, whose exports to the U.S. drive the Japanese economy.

U.S. auto tariffs are a worry for major manufacturers like Toyota Motor Corp., but some analysts note global auto sales have held up relatively well in recent months.

The U.S. has imposed 25% tariffs on auto imports. Japanese automakers have plants in Mexico, where Trump has announced a separate set of tariffs. The U.S. has also imposed 50% tariffs on steel and aluminum.

Japanese officials have been talking frequently with the Trump administration, stressing that Japan is a key U.S. ally.

Trump posted on his social media site Monday that Japan wasn’t buying enough rice from the U.S. “They won’t take our RICE, and yet they have a massive rice shortage,” the president wrote, adding that a letter to Japan was coming.

Also on Monday, National Economic Council director Kevin Hassett told reporters at the White House that Trump “is going to finalize the frameworks we negotiated with a whole bunch of countries after the weekend.”

The Bank of Japan, which has kept interest rates extremely low for years to encourage growth, is expected to continue to raise interest rates, but some analysts expect that to wait until next year.

The central bank raised its benchmark rate to 0.5% from 0.1% at the start of this year and has maintained that rate. The next Bank of Japan monetary policy board meeting is at the end of this month. The tankan findings work as important data in weighing a decision.

The weak yen has raised the cost of materials for Japan at a time when the U.S. dollar has been trading at around 140 yen, up considerably from about 110 yen five years ago. A weak yen is a boon for Japan’s exporters by boosting the value of their earnings when converted into yen.

The tankan showed sentiment for large non-manufacturers fell to plus 34 from plus 35. That was better than some forecasts, which projected a deeper decline.

The Japanese government reported last week that the nation’s unemployment rate in May stood at 2.5%, unchanged from the previous month.

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Yuri Kageyama is on Threads: https://www.threads.net/@yurikageyama