Bank of Japan Tankan Survey Gives Off Mixed Signals in June; Sentiment Declines Among Automakers as Trump Tariffs Felt

By Kentaro Otsuka and Yuiko Sakashita / Yomiuri Shimbun Staff Writers

6:00 JST, July 3, 2025

The Bank of Japan’s quarterly Tankan survey gave off mixed signals in June as large manufacturers saw their diffusion index improve slightly for the first time in two quarters. However, this positive trend was heavily overshadowed by dampened sentiment among automakers, who are being directly hit by U.S. tariffs.

The additional tariffs imposed by U.S. President Donald Trump’s administration on automobiles have already worsened sentiment across large enterprises as well as small and medium-sized ones, sparking concerns about a wider economic impact.

Future uncertainties

In Hiroshima Prefecture, home to Mazda Motor Corp.’s headquarters and many automotive-related businesses, engine parts manufacturer Benda-Kogyo Co. predicts a decline in its performance for the second half of fiscal 2025. Located in Kure in the prefecture, the company also anticipates a decrease in revenue and profit for the full year.

Given that exports to the United States account for about 10% of its sales, the company projects a decline in sales if its client automakers increase prices in the United States in response to the Trump administration’s high tariff policies.

Benda-Kogyo President Kazunari Yashiro, 56, is closely monitoring the progress of the Japan-U.S. tariff negotiations. “Negotiations with the United States, which is trying to revitalize its manufacturing industry, will be difficult,” Yashiro said. “I’m worried that the situation will be prolonged.”

Pressure on profits

On April 3, the Trump administration imposed an additional 25% tariff on imported automobiles. Three months later, the impact is beginning to be felt.

At Honda Motor Co.’s general shareholders meeting in June, President Toshihiro Mibe announced the carmaker’s plan to increase production in the United States. “We will stop exporting finished vehicles from Japan to the United States to minimize the impact [of the tariff burden],” Mibe said.

Hasegawa Yuki, a manufacturer of resin parts based in Ota, Gunma Prefecture, that supplies Subaru Corp. and Honda, has seen a decline in orders from Honda. “If production in Japan drops, our workload will decrease as well,” said the president of the company.

According to the Bank of Japan, the export price index on a contract currency basis for May revealed an about 20% year-on-year decline in passenger car exports to North America.

This is believed to be due to Japanese automakers lowering prices at the export stage to avoid tariff-driven price increases in the United States.

“If pressure to cut costs is put on small and medium-sized enterprises, it could depress their performance and capital investment,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute Inc.

Toyota Motor Corp. estimates that U.S. tariffs will cut its operating profit by ¥180 billion in April and May alone. If the automotive industry, with its extensive supply chain, were to significantly deteriorate, it could impact the entire domestic economy.

Spending by tourists

The Tankan survey revealed that sentiment remained high among large and small and medium-sized enterprises in the nonmanufacturing sector. The Japan Foodservice Association reported a 10.8% year-on-year increase in restaurant sales for May.

This was due to robust spending by foreign visitors to Japan, coupled with many local consumers choosing to dine at nearby restaurants because the Golden Week holidays in May were interspersed with workdays.