Bank of Japan Signals More Rate Hikes After Upbeat Tankan Survey

The Bank of Japan is being nudged toward further interest-rate increases after its latest Tankan survey showed business confidence at its strongest in years. The headline index for large manufacturers climbed to +22, its highest since 2018 and above market expectations, while sentiment among big non-manufacturers reached a level not seen since the early 1990s. Companies raised their inflation expectations across every horizon, projecting consumer prices to rise about 2.7% over the coming year, and large firms said they plan to lift capital spending by more than 11% this fiscal year even as they brace for softer profits. The survey, covering more than 9,000 companies, strengthens the case for the central bank to continue normalising policy after it raised its benchmark rate to 1% in June, the highest level since 1995. Persistent labour shortages remained a defining feature across firms of all sizes, adding to wage and price pressures that support a gradual tightening path. Board members have suggested rates could move toward a neutral level near 2% over time. Markets will watch the central bank's July meeting for confirmation of the next step, amid a backdrop of volatile global technology shares.