According to the Bank of Japan's June Tankan survey, released on July 1, 2026 and reported by Nikkei, sentiment among large non-manufacturing companies improved for the fifth straight quarter, even as construction firms reported a decline. The diffusion index (DI) for large manufacturers rose 5 points from the March survey to plus 22, the highest level in roughly eight years, while large non-manufacturers gained 1 point to plus 37, the strongest reading since August 1991, or about 35 years.
Construction moved against this broader trend. Nikkei reported that construction sentiment fell 3 points to plus 52, with real estate also down 3 points to the same plus 52 level, both dragged down by rising raw-material and labor costs. By contrast, hospitality and food services jumped 12 points to plus 46 and retail rose 7 points to plus 33, sectors that benefited from passing on labor costs to sales prices and from steady inbound tourism demand.
The DI measures the share of firms describing conditions as "favorable" minus those saying "unfavorable." The survey ran from May 28 to June 30, 2026, with a response rate of 99% among the panel of companies, and roughly 70% of responses were already in by June 11. Nikkei noted that any pricing-in of the ceasefire agreement between the United States and Iran was limited given the survey timing.
Looking ahead, large manufacturers expect sentiment to worsen by 5 points to plus 17 over the next three months, while non-manufacturers, which include construction, project a 9-point decline to plus 28. Nikkei attributed the cautious outlook to cost increases stemming from supply-chain disruptions, a possible slowdown in consumer spending amid rising prices, and severe labor shortages. Companies also revised their assumed exchange rate for fiscal 2026 to 152,57 yen per dollar, from 150,10 yen in the prior survey, a shift toward a weaker yen that Nikkei said could support the earnings of exporters.