Updated 28 October 2026: rewritten, expanded and fact-checked against the sources listed in the article.
In the week of 12 July 2026, two Bank of Japan surveys pointed to an economy that was holding up despite an oil shock from the Middle East conflict. Markets kept expecting another BOJ rate increase before the end of the year. The June Tankan survey, released on 1 July, showed big manufacturers more confident than in March. The BOJ’s Regional Economic Report of 9 July, put together from its branch managers’ reports, said all nine of Japan’s regions were recovering or picking up. Both were summarised in a Mace News week-ahead preview.
At the time, the BOJ’s policy rate was 1.0%, after a 25-basis-point increase on 16 June. According to the preview, many economists and market participants expected a sixth hike in the current cycle by the end of the year. Some pointed to the 29-30 October meeting, others to 17-18 December.
What the Tankan showed
The Tankan is the BOJ’s quarterly survey of about 9,100 companies. Its main measure is a diffusion index (DI): the share of firms saying business conditions are “favorable” minus the share saying “unfavorable”. In the June 2026 survey:
- The DI for large manufacturers rose to +22 from +17 in March. The DI for large non-manufacturers edged up to +37 from +36.
- Both groups expected conditions to get worse over the next three months. Their forecast DIs were +17 for large manufacturers and +28 for large non-manufacturers.
- Large firms planned to raise fixed investment (including land, excluding software and R&D) by 11.5% in fiscal 2026. Mace News noted this was up from +3.3% in the March survey.
The earlier version of this article said “65% of firms” were optimistic. The Tankan reports no such figure. In June, 27% of large manufacturers called conditions “favorable”, 68% “not so favorable” and 5% “unfavorable”.
What the branch managers reported
On 9 July the BOJ kept its assessment unchanged for all nine regions. All of them “had been recovering moderately, picking up, or picking up moderately,” although some weak spots were noted. According to the Mace News summary, managers said the Middle East conflict had disrupted exports and production. They added that the risk of a sharp drop had eased as Japanese firms found other supply routes. Demand linked to AI was supporting semiconductor equipment and electronic components. Wage increases averaging about 5% for a third year were helping tourism, hotels and restaurants.
Growth and inflation: the real numbers
The previous version said Japan’s GDP was “projected to expand by 1.5% in 2026” and that inflation “currently sits at a 3% annual rate”. Neither figure matches official data.
- Growth: The BOJ’s July 2026 Outlook Report (31 July) put the board’s median forecast for real GDP growth at 0.6% in fiscal 2026, 0.8% in fiscal 2027 and 0.8% in fiscal 2028. In April the fiscal 2026 forecast had been 0.5%.
- Inflation: In its 16 June statement, the BOJ said core CPI (all items less fresh food) had recently been “around 1.5 percent”. Government energy subsidies were holding it down after it had been above 2% because of food and rice prices. The BOJ still expected core inflation to rise “clearly above 2 percent” from the second half of fiscal 2026, and forecast a median of 2.5% for the fiscal year in July (2.8% in April).
The old article also gave a market value for the Nikkei 225 of “¥700 trillion” and quoted a “Hiroshi Nakagawa, an economist at Tokyo University”. We could not verify either one, so both have been removed.
Markets around the report
Yahoo Finance daily closing data show the Nikkei 225 at 68,557.73 on Friday 10 July 2026. That was below its 2026 high of 72,366.34 on 25 June. The dollar was at about ¥162.36 on 9 July and reached ¥163.86 on 28 July, its weakest yen level of the year in this data set. A weak yen keeps import costs high, which is one reason the BOJ watches the currency closely. For how dollar strength works across markets, see our guide to the US Dollar Index (DXY).
What happened next
- 31 July 2026: The BOJ kept its rate at 1.0% by an 8-1 vote. Board member Takata Hajime voted against and proposed raising it to 1.25%.
- 18 September 2026: The BOJ raised the rate to around 1.25%, effective 24 September, by a 7-2 vote. Asada Toichiro and Sato Ayano dissented. The BOJ said underlying inflation was “approaching 2 percent”. It put core CPI in a 1.5-2.0% range and said it would keep raising rates if its outlook held. The hike came earlier than the December timing many had expected in July.
- 1 October 2026: The September Tankan showed the large-manufacturer DI up again to +24, while the large non-manufacturer DI dipped to +35. Large firms’ fiscal 2026 capex plans stayed strong at +11.3%.
- 8 October 2026: The October Regional Economic Report upgraded Tohoku and Shikoku and left the other seven regions unchanged. It noted weakness in Kyushu-Okinawa linked to the 2026 Kumamoto earthquake.
Update, 28 October 2026
On 28 October 2026 the Nikkei 225 closed at 63,954.19 and the dollar at about ¥157.90 (Yahoo Finance daily closing data). Compared with the week of the original report, stocks were lower and the yen was stronger. The BOJ’s next policy meeting was on 29-30 October, when it was also due to publish a new Outlook Report. We covered the summer rate debate in our BOJ interest rate policy report and the yen’s slide in our yen market analysis.
What to watch
- The 30 October Outlook Report: whether the BOJ keeps fiscal 2026 growth near 0.6% and core inflation above 2%.
- Core CPI moving above 2% as subsidies fade, which the BOJ has named as an upside risk.
- Oil prices and the Middle East situation, which the BOJ lists as the main risk to its forecast.
- The yen: any sharp move affects import prices and, through them, the timing of the next hike.
Sources
- Bank of Japan: Tankan Summary (June 2026), 1 July 2026
- Bank of Japan: Tankan Summary (September 2026), 1 October 2026
- Bank of Japan: Regional Economic Report (July 2026), 9 July 2026
- Bank of Japan: Regional Economic Report (October 2026), 8 October 2026
- Bank of Japan: Change in the Guideline for Money Market Operations, 16 June 2026
- Bank of Japan: Statement on Monetary Policy, 31 July 2026
- Bank of Japan: Outlook for Economic Activity and Prices (July 2026), 31 July 2026
- Bank of Japan: Change in the Guideline for Money Market Operations, 18 September 2026
- Mace News via TradingView: Japan week ahead, July 2026
- Yahoo Finance daily closing data, ^N225 and JPY=X (retrieved 28 October 2026)
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Corrections: An earlier version cited figures we could not find in any source (65% of firms optimistic, 3% inflation, 1.5% GDP growth, a ¥700 trillion Nikkei market value) and quoted a professor we could not identify. They were replaced with Bank of Japan data.
How this article was made: first published on 12 July 2026 as an AI-assisted rewrite of a news report (original report: TradingView News). On 28 October 2026 it was rewritten and expanded with AI assistance, and its facts and figures were checked against the primary sources linked above; errors in the earlier version are listed above. How we work · Report an error
