By Makiko Yamazaki
TOKYO, Oct 7 (Reuters) - Business confidence at big Japanese manufacturers rose in October to its highest level in nearly five years, helped by robust chip demand, but sentiment among non-manufacturers deteriorated sharply amid rising costs, a Reuters monthly poll showed.
The Reuters Tankan sentiment index for manufacturers edged up to plus-22 from plus-21 in September, a level not seen since December 2021.
Confidence in the precision machinery sector, which includes some chip-related
equipment makers, jumped nine points to plus-38.
"The semiconductor industry remains buoyant and order volumes have been running at 1.5 times normal levels for the past four months," a manager at a precision machinery company wrote.
Another respondent at a machinery firm cited strong orders and shipments for products serving the semiconductor market.
Sentiment in the metal products sector also rose nine points, to plus-35, while the steel and nonferrous metals sector surged to plus-25 from minus-13.
The poll, a leading indicator of the Bank of Japan's quarterly Tankan survey, was conducted from September 18 to October 2 and received responses from 215 out of 508 firms.
The indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones, with positive figures indicating net optimism.
The non-manufacturers' sentiment fell to plus-23 from plus-29, its lowest level since November 2024.
Food producers recorded the sharpest deterioration, dropping 15 points to minus-40 as higher raw-material costs and weak consumer spending squeezed profits.
Sentiment in the information and communications sector tumbled to plus-8 from plus-21. Retailers fell to plus-8 from plus-18, while real estate and construction declined to plus-28 from plus-37.
Respondents pointed to higher interest rates, elevated construction costs and weaker household spending. "Property investment has become difficult because of rising interest rates and construction costs," a real-estate company manager wrote.
Wholesalers bucked the broader trend, rising to plus-30 from plus-24, helped by stronger demand for construction materials linked to disaster-recovery projects.
Looking three months ahead, manufacturers expect sentiment to improve modestly to plus-23, while non-manufacturers see their index easing further to plus-21.
Several manufacturers also warned that strong AI-related demand may eventually moderate, while service-sector firms expressed concern that inflation was weighing on household purchasing power.
(Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)
