Large Japanese manufacturers are feeling a decline in business sentiment for the first time in a year, attributed partly to concerns regarding tariffs imposed by US President Donald Trump, as stated in a survey from Japan’s central bank released on Tuesday.

The Bank of Japan’s quarterly "tankan" survey revealed a drop in the index for large manufacturers, indicating a decrease in the number of companies expecting favorable conditions compared to those with pessimistic views, falling from plus 14 to plus 12 since December. Major contributors to this index include sectors like automotive and electronics, which heavily rely on exports to the US.

Challenges such as a declining population have impacted Japan’s economic growth, although increasing wages and a thriving tourism industry have provided some support. Worries persist among significant manufacturers such as Toyota Motor Corp. and Nissan Motor Corp. regarding potential US auto tariffs.

Prime Minister Shigeru Ishiba expressed efforts to negotiate with the US to exempt Japan from auto tariffs, willing to visit Washington for direct discussions with Trump if required. The US is set to commence imposing 25% tariffs on auto imports on Thursday, with tariffs on fully-imported vehicles starting at midnight local time, subsequently expanding to include auto parts by May 3.

The Bank of Japan will conclude a monetary policy meeting on April 1 to consider further interest rate adjustments, with the tankan survey results serving as crucial data for decision-making. Japan's export-driven economy faces challenges from reduced overseas demand and increased material costs, exacerbated by a weaker yen against the US dollar, now trading around 150 yen as opposed to 110 yen five years ago.

The tankan report demonstrated improved sentiment among large non-manufacturers, rising from plus 33 to plus 35, buoyed by robust tourist activity. Additionally, Japan reported a slight decline in the unemployment rate to 2.4% compared to the previous month.