Yen Rises As Japan Tankan Data Adds To BOJ Rate-Hike Prospects

(RTTNews) - The Japanese yen strengthened against other major currencies in the European session on Tuesday, following the Bank of Japan's Tankan survey indicating that business sentiment among major Japanese firms has improved slightly, which increased the likelihood of additional rate hikes by the Japanese central bank.

Data from the Bank of Japan's quarterly Tankan Survey of business sentiment showed that large manufacturing in Japan accelerated slightly in the second quarter of 2025, with a diffusion index score of +13. That beat forecasts for +10 and was up from +12 in the previous three months.

The outlook came in at +12, beating forecasts for +9 and unchanged from the previous quarter.

The large non-manufacturers index came in at +34, matching forecasts and down from +35. The outlook slipped to +27 from +28 in the three months prior.

The small manufacturing index fell to +1 from +2, while the small non-manufacturing index was steady at +9.

Large industry capex is seen higher by 11.5 percent, up from 3.1 percent in Q1. Small industry capex was down 5.6 percent after sinking 10.0 percent in the three months prior.

In other economic news, Japan's consumer sentiment increased further in June to the highest level in four months, survey data from the Cabinet Office showed on Tuesday. The seasonally adjusted consumer confidence index rose to 34.5 in June from 32.8 in May. Economists had forecast the index to rise to 33.6.

The latest survey was conducted on June 15 among 8,400 households.

Additionally, the manufacturing sector in Japan moved up into expansion territory in June, the latest survey from Jibun Bank revealed on Tuesday with a manufacturing PMI score of 50.1. That's up from 49.4 in May and it moves up above the boom-or-bust line of 50 that separates expansion from contraction. Investors are digesting the latest batch of regional economic data, and closely following news about negotiations with the U.S. ahead of a July 9 deadline for reciprocal tariffs.

In the European trading today, the yen rose to a 6-day high of 168.46 against the euro and an 8-day high of 196.80 against the pound, from early lows of 169.66 and 197.76, respectively. If the yen extends its uptrend, it is likely to find resistance around 166.00 against the euro and 192.00 against the pound.

Against the U.S. and the Canadian dollars, the yen advanced to nearly a 3-week high of 142.82 and a 5-day high of 105.08 from early lows of 143.94 and 105.77, respectively. The yen is likely to find resistance around 140.00 against the greenback and 104.00 against the loonie.

Against the Swiss franc, the Australia and the New Zealand dollars, the yen climbed to 180.87, 94.09 and 87.32 from early lows of 181.68, 94.60 and 87.68, respectively. On the upside, 179.00 against the franc, 92.00 against the aussie and 85.00 against the kiwi are seen as the next resistance levels for the yen.

Looking ahead, U.S. Redbook report, U.S. S&P Global manufacturing PMI for June, U.S. construction spending for May, U.S. ISM manufacturing new orders for June and U.S. Dallas Fed services index for June is set to be published in the New York session.