Japan business mood hits 4-year high, keeps alive BOJ rate-hike view

TOKYO, Dec 15 (Reuters): Big Japanese manufacturers' business sentiment hit a four-year high in the three months to December, a closely watched survey showed on Monday, reinforcing market expectations the central bank will raise interest rates this week. But firms expect conditions to worsen three months ahead as they fret over the impact of higher US tariffs and soft consumption, highlighting uncertainty over how far the Bank of Japan (BOJ) could eventually push up borrowing costs.
The headline index measuring big manufacturers' business confidence stood at +15 in December, the BOJ's "tankan" survey showed, up from +14 in September and matching a median market forecast.
The reading, which marked the third straight quarter of improvement, was the highest since December 2021 in a sign firms were weathering the hit from higher US tariffs for now.
An index gauging big non-manufacturers' sentiment stood at +34 in December, unchanged from September and roughly in line with market forecasts for a reading of +35.
"All in all, the tankan backs up dominant market views the BOJ will raise rates in December. Unless a huge shock hits the economy or markets, it is likely to proceed with a hike," said Masato Koike, senior economist at Sompo Institute Plus.