Optimism among Japan's largest manufacturers rose slightly in the Bank of Japan's (BOJ) latest Tankan survey, with the index inching up to +14 from +13 in the previous quarter. In contrast, non-manufacturers saw a marginal dip, as their index slipped from +34 to +33. This survey reflects business sentiment by calculating the gap between optimistic and pessimistic firms.

Japan's economic growth decelerated between July and September due to severe weather, including a major typhoon and earthquake warnings. These disruptions dampened activity, contributing to the cautious outlook among analysts.

To counter the slowdown, Japan's lower house approved an additional 14 trillion yen ($90 billion) budget to fund a significant economic stimulus package. Prime Minister Shigeru Ishiba hopes this measure will not only revive growth but also bolster his administration’s waning popularity following a poor electoral performance.

Attention now turns to the BOJ’s upcoming policy meeting, where opinions are split on the likelihood of a third interest rate hike this year. Such a move would further signal a departure from the institution's long-standing ultra-loose monetary stance.

Although the Tankan survey indicates slight optimism, analysts suggest that Japan’s economic recovery remains fragile. The success of government stimulus efforts and any policy adjustments by the BOJ will be pivotal in determining the nation’s economic trajectory.