Japan Inc Sentiment Up, But Iran War Threatens Outlook

• Japan's large firms saw modest improvement in business sentiment in Q1, driven by domestic demand.
• Bank of Japan's Tankan survey showed big manufacturers' confidence rose to +17 in March from +16 in December.
• Large non-manufacturers' confidence remained strong at +36, indicating robust services consumption.
• Companies are increasingly cautious about the future due to the Iran war's impact on global supply chains and energy costs.
• The Iran conflict, choking the Strait of Hormuz, poses a dual threat to Japan: higher inflation and squeezed corporate margins.