Japan business sentiment lifts, putting rate hikes in focus #JapanFinance

STORY: Corporate Japan is feeling a little more festive ahead of the holiday season.

On Friday, the quarterly “tankan” survey rose to +14.

That’s the highest figure for the closely watched gauge of business sentiment since early 2022.

Bank of Japan governor Kazuo Ueda will be punching in the figures as he weighs his next decision on rates.

The central bank is due to hold a policy meeting next week.

And the tankan numbers bode well for its plan to gradually lift rates from the current level of just 0.25%.

However, Reuters sources say next week may be too soon for another hike.

They say policymakers are leaning towards waiting for more evidence on wages before making a decision.

Around half of economists do forecast a hike in December, but markets price in a less than 30% probability.

There’s another X-factor in the equation too, and it’s called Donald Trump.

Economists say the overseas outlook is uncertain ahead of his second administration.

Japan’s big automakers, in particular, could be at risk from his promise of sweeping tariffs.

The Bank of Japan will be keeping an eye on the U.S. Federal Reserve as well, with a rate decision there coming just hours before its own.

The Fed is widely expected to cut rates, but could trigger a surge for the dollar it decides to hold steady.

That would increase pressure on the BOJ to increase its rates, to counter any further slide in the already very weak Japanese yen.