A quarterly survey of major Japanese manufacturers released Monday shows business sentiment improving to its best level in four years, even after President Trump raised tariffs on goods from the U.S. ally to a baseline level of 15%.
The Bank of Japan is bound to take the results of its quarterly “tankan” survey into account during a policy meeting this week, when it is expected to raise its benchmark interest rate. Analysts said the stronger results may sway the BOJ toward pressing ahead with a 0.25 percentage point rate hike that will take the key rate to 0.75%.
That expectation hit the price of bitcoin early Monday, as it dipped below $88,000 from about $92,000. Higher rates would likely lead Japanese investors to shift funds back home, sapping demand for cryptocurrencies.
While the U.S. Federal Reserve has been trimming rates to counter a weak jobs market, Japan’s central bank is moving in the other direction as it contends with inflation and a weak currency. The economy contracted at an annualized rate of 2.3% in July-September.
Still, the BOJ survey showed the measure of major manufacturers expressing optimism rose to 15 from 14 in the last quarter, the highest level in four years. The index shows the percentage of companies reporting positive conditions minus the percentage reporting unfavorable ones.
The measure of sentiment for all companies rose to 17 from 15, it said.
The survey “struck all the right notes from the Bank of Japan's perspective,” Abhijit Surya of Capital Economics said in a report. “It showed that business conditions are improving, profit margins remain elevated and firms are upbeat about their investment intentions.”
The latest deal between Japan and the Trump administration set tariffs on its exports to the U.S. at 15%, down from an earlier plan for a 25% tariff. To win the agreement, among other things Japan promised to invest $550 billion in the United States.
While the BOJ's overall survey showed improvement, forecasts for the next quarter were less positive, and businesses expected inflation to remain at 2.4%, above the central bank's target range.
The Bank of Japan has kept its key interest rate near or below zero for years, trying to spur faster economic growth by keeping borrowing costs very low.
Its policymaking has been complicated by the fact that Japan's population is shrinking and aging rapidly. That has caused labor shortages that have only slowly pushed wages higher. That should lead consumers to spend more, but increases in income have lagged behind inflation, denting their appetite for spending.
Prime Minister Sanae Takaichi has pledged, as have her predecessors, to revive the economy. Last month, her cabinet approved a 21.3 trillion yen ($135.4 billion) stimulus package to spur growth through expansionary government spending and relieve the impact of higher prices.
A general view of a container port seen from a helicopter in Tokyo, on Oct. 29, 2025. (AP Photo/Mark Schiefelbein)
FILE - A Japanese flag flutters at the Bank of Japan headquarters in Tokyo on July 29, 2022. (AP Photo/Shuji Kajiyama, File)
Ukrainian President Volodymyr Zelenskyy said the future of Ukraine’s eastern Donbas region would be a key focus as negotiators from Ukraine, Russia and the United States meet in Abu Dhabi for talks to end Russia’s nearly four-year full-scale invasion.
The UAE’s foreign ministry said the talks, which commenced on Friday and were scheduled to continue Saturday, were part of efforts "to promote dialogue and identify political solutions to the crisis.” The White House described the talks as productive.
Just hours before the three-way talks began, Russian President Vladimir Putin discussed a Ukraine settlement with U.S. President Donald Trump’s envoys Steve Witkoff and Jared Kushner during marathon overnight talks. The Kremlin insisted that to reach a peace deal, Kyiv must withdraw its troops from the areas in the east that Russia illegally annexed but has not fully captured.
Zelenskyy said after meeting with Trump on Thursday in Davos, Switzerland, that while the future status of land in eastern Ukraine currently occupied by Russia remains unresolved, the peace proposals are “nearly ready.”
He also reiterated his openness to establishing a free trade zone under Ukraine’s control in the country’s east, adding that he discussed the proposal with Trump. “I think it will be positive for our business," Zelenskyy told reporters.
Friday is the first known time that officials from the Trump administration simultaneously met with negotiators from both Ukraine and Russia. While it’s unclear how the talks will unfold and many obstacles to peace remain, some see it as a sign that the parties are making headway in closing a deal.
Speaking in his evening address to the nation late Friday, Zelenskyy said the Ukrainian delegation at the talks reported to him “almost every hour.”
“They are discussing the parameters for ending the war," Zelenskyy said. "Now, they should at least get some answers from Russia, and the most important thing is that Russia should be ready to end this war, which it itself started.”
He added that it was too early to draw conclusions about Friday's talks and he would see how they go on Saturday.
"It’s not just about Ukraine’s desire to end this war and achieve full security — it’s also about Russia somehow developing a similar desire,” Zelenskyy said.
The Kremlin offered little detail beyond calling Friday’s meeting a “working group on security issues.”
Kremlin spokesman Dmitry Peskov reaffirmed that Russia's demand for the Ukrainian troops' withdrawal from the eastern Donbas region is an “important condition,” adding that there are other “nuances” on the agenda that he wouldn't specify.
Kremlin foreign affairs adviser Yuri Ushakov, who participated in Putin’s meeting with Witkoff and Kushner, said “it was reaffirmed that reaching a long-term settlement can’t be expected without solving the territorial issue.” He described the talks with the U.S. as “frank, constructive” and “fruitful.”
Russia’s state Tass news agency reported that the discussions included possible buffer zones and control measures.
Peskov told reporters that the Russian delegation, headed by Adm. Igor Kostyukov, is comprised of military officials. Separately, Putin’s envoy Kirill Dmitriev will hold talks with Witkoff on economic issues, Peskov added.
The U.S. has confirmed Witkoff and Kushner are attending the talks in Abu Dhabi along with Army Secretary Dan Driscoll and NATO’s top general, U.S. Air Force Gen. Alexus Grynkewich.
The Ukrainian team includes Rustem Umerov, head of Ukraine’s national security and defense council; Andrii Hnatov, chief of the general staff; and Kyrylo Budanov, head of the presidential office.
Hours before the Kremin talks, Zelenskyy met with Trump behind closed doors for about an hour at the World Economic Forum in Davos, describing the meeting as “productive and meaningful.”
Speaking to reporters aboard Air Force One as he flew back to Washington, Trump said the meeting went well, adding that both Putin and Zelenskyy want to reach a deal and that “everyone’s making concessions” to try to end the war.
He said the sticking points remain the same as they’ve been during talks held during the past six or seven months, noting “boundaries” was a key issue. “The main hold-up is the same things that’s been holding it up for the last year,” he said.
Russia’s bigger army has managed to capture about 20% of Ukraine since hostilities began in 2014 and its full-scale invasion of 2022. But the battlefield gains along the roughly 1,000-kilometer (600-mile) front line have been costly for Moscow, and the Russian economy is feeling the consequences of the war and international sanctions.
Ukraine is short of money and, despite significantly boosting its own arms manufacturing, still needs Western weaponry. It is also short-handed on the front line. Its defense minister last week reported some 200,000 troop desertions, and draft-dodging by about 2 million Ukrainians.
Addressing the World Economic Forum on Thursday after meeting with Trump, Zelenskyy listed a litany of grievances and criticisms of Europe.
He chided Europe for being slow to act on key decisions, spending too little on defense, failing to stop Russia’s ”shadow fleet” of oil tankers that are breaking international sanctions, and balking at using its frozen assets in Europe to finance Ukraine, among other things.
“Europe looks lost,” Zelenskyy said in his speech, urging the continent to become a global force. He contrasted Europe’s response with Washington’s bold steps in Venezuela and Iran.
The former comic actor referred to the movie “Groundhog Day,” in which the main character must relive the same day over and over again.
“Just last year, here in Davos, I ended my speech with the words: Europe needs to know how to defend itself. A year has passed. And nothing has changed. We are still in a situation where I must say the same words again,” Zelenskyy said.
Hrabchuk reported from Kyiv, Ukraine, and Manenkov from Davos, Switzerland. Josh Boak on Air Force One, Meg Kinnard in Houston and Aamer Madhani, Konstantin Toropin and Ali Swenson in Washington contributed to this report.
Follow AP’s coverage of the war in Ukraine at https://apnews.com/hub/russia-ukraine
Russian President Vladimir Putin speaks during a meeting on the development of domestic integrated electronics at the Kremlin in Moscow, Thursday, Jan. 22, 2026. (Vyacheslav Prokofyev/Sputnik, Kremlin Pool Photo via AP)
Russian President Vladimir Putin, left, greets U.S. President Donald Trump's envoys Steve Witkoff at the Senate Palace of the Kremlin, in Moscow, Thursday, Jan. 22, 2026. (Alexander Kazakov/Sputnik, Kremlin Pool Photo via AP)
Russian President Vladimir Putin, left, greets U.S. President Donald Trump's envoys Steve Witkoff, center, and Jared Kushner at the Senate Palace of the Kremlin, in Moscow, Thursday, Jan. 22, 2026. (Alexander Kazakov/Sputnik, Kremlin Pool Photo via AP)
Russian President Vladimir Putin, left, greet U.S. President Donald Trump's envoys Steve Witkoff, centre left, Jared Kushner, second right, and Josh Gruenbaum, the head of the Federal Acquisition Service at the General Services Administration, at the Senate Palace of the Kremlin, in Moscow, Thursday, Jan. 22, 2026. (Alexander Kazakov/Sputnik, Kremlin Pool Photo via AP)
