Shibuya pedestrian crossing in Tokyo.
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Japan’s leading manufacturers posted the highest level of business optimism in more than four years, despite the uncertainty brought on by the Iran war.
This is based on the Bank of Japan’s quarterly Tankan survey, which is a closely watched public opinion poll that measures business confidence among domestic companies.
According to the survey results released on April 1, the economic optimism index for Japan’s major manufacturers in the first quarter of 2026 was 17, up from 15 in the previous quarter and contrary to the 16 expected by economists polled by Reuters.
Positive numbers in the Tankan indicate that optimists outnumber pessimists and vice versa.
The figure was the highest since the fourth quarter of 2021, according to LSEG data.
Carlos Casanova, senior economist for Asia at Swiss private bank UBP, said in an email to CNBC that this was helped by “solid margins” that offset pressure from rising energy costs.
Business confidence for major non-manufacturers was at 36, the highest level in decades, according to LSEG data, and the same as last quarter’s revised reading of 36. This was also lower than the 33 expected in a Reuters poll.
of Nikkei Stock Average The stock rose 4.48% on Wednesday after the data was released, boosted by hopes that the Iran war could end soon.
Frederick Newman, CNBC’s chief Asia economist, said in comments to CNBC. HSBCsaid the improvement in business confidence was due to Japan’s economic momentum accelerating at the beginning of the year, supported by strong exports in January and February.
However, since the survey period ended in March, positive sentiment may not fully capture the impact of the Iran war.
“While this survey shows that strong momentum continues in the conflict, the outlook for activity in the coming months is increasingly uncertain, with the Strait of Hormuz remaining closed on a daily and weekly basis, further exacerbating the challenges of rising energy costs and supply chain disruptions,” Newman said.
Neumann stressed that the Tankan was a “somewhat backward-looking” study that downplayed the uncertainty of the Gulf conflict and its impact on energy costs and supply chains.
This view is echoed by Norihiro Yamaguchi, chief Japan economist at Oxford Economics. “Given the survey period, many responses do not seem to fully reflect the escalation of the Iranian conflict,” Yamaguchi said in an email to CNBC.
Therefore, Yamaguchi said he expects higher energy prices to worsen business sentiment going forward by worsening the terms of trade, or the ratio of export prices to import prices.
The data came as Japan grapples with the fallout from the Iran war, releasing oil reserves and enacting fuel subsidies to avoid the worst energy shock from the closed Strait of Hormuz.
According to data from the International Energy Agency, Japan relies on imports for more than 87% of its energy needs.
Reuters reported that a 10% rise in oil prices could raise Japan’s consumer inflation rate by up to 0.3 percentage points in about a year.
