Japan’s largest businesses turned pessimistic for the first time in more than a year as U.S. President Donald Trump’s sweeping tariffs upended key sectors, a development that could complicate the Bank of Japan’s policy path.

The Business Sentiment Index for large firms registered minus 1.9 for the April-June quarter, slipping into negative territory for the first time since the first quarter of 2024, according to a Finance Ministry survey released Thursday. A negative figure indicates that more companies reported deteriorating conditions than those that saw improvements.

Among large manufacturers, sentiment dropped to minus 4.8, also the weakest in five quarters, driven by sharp declines in the automotive, auto parts and steel industries. Nonmanufacturers posted a reading of minus 0.5, turning negative for the first time since the third quarter of 2022, with the retail and telecommunications sectors weighing on the gauge.

Thursday’s data underscore growing anxiety among Japanese firms amid prolonged uncertainty over U.S. trade policies. Trump initially slapped 25% duties on steel and aluminum in March before recently hiking that rate to 50%. Autos became subject to 25% duties from April, and all other products were simultaneously hit with a 10% levy across the board, a rate that will revert to 24% for Japanese goods in early July, barring a trade deal.

The data showed that industries most exposed to the elevated U.S. duties have seen particularly steep drops in sentiment. Automakers and parts suppliers reported a plunge to minus 16.1 from 8.8 in the previous quarter, while steelmakers’ sentiment tumbled to minus 29.1 from 0.

The bleak readings are likely to inject a degree of caution into central bank policy deliberations even after Gov. Kazuo Ueda reiterated his position earlier this week that rate hikes will proceed if and when conditions allow. The bank’s policy board is widely expected to hold its benchmark interest rate steady when it next sets policy on June 17, with focus falling on updated plans for government bond purchases.

The figures largely align with the government’s latest economic view. Economic Revitalization Minister Ryosei Akazawa warned on Wednesday of rising downside risks to Japan’s economy stemming from U.S. trade measures. Akazawa is expected to depart for Washington later this week for his sixth round of trade negotiations with U.S. counterparts.