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The Bank of Japan’s sentiment index for large manufacturers experienced a slight increase, reaching 15 in the fourth quarter of 2025 from 14 in the previous quarter, marking a third consecutive quarter of growth and achieving the highest level since the fourth quarter of 2021. This improvement is attributed to the persistent weakness of the yen and robust global demand, particularly from the AI sector. The recent figure aligns with market expectations, showing optimistic sentiment among companies involved in lumber and wood production (rising to 0 from -8 in Q3), pulp (34 up from 26), petroleum (33 shifting from 0), iron and steel (-11 improving from -14), food and beverages (9 increasing from 6), chemicals (22 rising from 15), electrical machinery (17 from 16), shipbuilding (41 up from 36), and processed metals (8 rising from 0).
Simultaneously, sentiment remained unchanged for textiles (steady at 4), general-purpose machinery (anchored at 27), and production machinery (stable at 17). However, there was a decline in confidence for motor vehicles (9 decreasing from 10) and business-oriented machinery (13 falling from 22). Large corporations intend to increase capital expenditure by 12.6% in the fourth quarter, following a 12.5% rise in the third quarter, surpassing forecasts of a 12% increase. This reflects the most substantial rise in investment intentions in the past eight quarters.
