The Bank of Japan’s December Tankan survey, which covers approximately 9,000 companies, showed that the index for large manufacturers rose to plus 14, marking a one-point increase from the previous survey in September.  

This positive shift is attributed to robust demand in capital investment and a recovery in automobile production, which had previously been affected by certification fraud issues. 

Meanwhile, in the non-manufacturing sector, small and medium-sized enterprises have seen improvements for two consecutive quarters. This is largely due to their ability to pass on rising costs to prices, maintaining a high level of business sentiment. 

However, a significant concern remains in the form of labor shortages. The index indicating labor shortages in the non-manufacturing sector for small and medium-sized enterprises has reached its worst level since the survey began in 1983, leading to rising labor costs. 

The Bank of Japan will consider these findings in its upcoming monetary policy meeting on December 18 and 19, where it will decide on the possibility of interest rate hikes.