The Reuters Tankan index for Japanese manufacturers climbed to +9 in August 2025, marking a second consecutive monthly gain after readings of +7 in July and +6 in June. Confidence improved following a trade agreement between Tokyo and Washington, which lowered US tariffs on cars and other goods to 15% in exchange for a $550 billion Japanese investment package comprising equity, loans, and guarantees. Despite the current optimism, the index is expected to ease to +4 over the next three months as manufacturers remain cautious about the potential impact of US tariffs. The transport machinery sector, which includes Japan’s crucial auto industry, saw sentiment surge to +25 in August from +9 in July, but it is projected to retreat to +9 in November.