Japan business mood slumps to 1-year low on Trump tariff fears

Big Japanese manufacturers' business sentiment worsened to a one-year low in the three months to March, a central bank survey showed on Tuesday, a sign escalating trade tensions were already taking a toll on the exportreliant economy.

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The gloom contrasted with big non-manufacturers, which improved to levels unseen since 1991 on booming profits from inbound tourism and the pass-through of costs via price hikes.

However, both manufacturers and service-sector firms expect business conditions to stagnate or worsen in three months amid soft global demand, rising costs and uncertainty over US tariffs cloud the outlook, the quarterly "tankan" survey showed.

The survey, compiled before US President Donald Trump's announcement last week of a plan to impose tariffs on auto imports, highlights how external headwinds are complicating the BOJ's decision around the timing of further interest rate hikes.

"Companies haven't fully priced in the impact of US tariffs, which is causing a sense of alarm but not directly hitting their profits yet," said Kazuhiro Maeda, an economist at Meiji Yasuda Research Institute.