Japan manufacturers' mood steady, seen rising - Reuters Tankan

Reuters

By Tetsushi Kajimoto and Izumi Nakagawa

TOKYO (Reuters) - Confidence among Japanese manufacturers remained steady in October from the previous month, a Reuters monthly poll showed on Thursday, a sign the feel-good mood generated by Prime Minister Shinzo Abe's reflationary policies is persisting.

But the service sector's mood fell for a second straight month in October, underlining the view that private spending, which has led a recovery in the world's third-largest economy this year, is losing some momentum, according to the poll.

Still, the mood of both manufacturers and non-manufacturers is expected to improve over the next three months, with optimism far outweighing pessimism in both sectors, the poll showed.

A total of 278 businesses responded to the poll of 400 big and midsize firms taken September 30 to October 11. The poll is closely correlated with the Bank of Japan's tankan survey.

The index of sentiment among manufacturers, derived by subtracting the percentage of pessimistic responses from optimistic ones, was unchanged at plus 12 in October. It is seen rebounding to plus 16 in January.

Sentiment has worsened at four out of nine manufacturing industries, including food and precision machinery, but it is seen either rising or flat among all industries over the next three months -- a sign the economic recovery is broadening.

"Appetite for capital spending at our client firms seems to be recovering, but (expenditures) remain at low levels compared with before (the collapse of) Lehman" Brothers in 2008, said one maker of electric machinery.

Some other manufacturers complained about sluggish demand in China and other parts of Asia -- a sign that a slowdown in emerging market economies is affecting Japanese exporters.

The service-sector sentiment gauge fell to plus 18 in October from plus 20 in the previous month, down for the second straight month. Its August reading was the highest in more than six years, and is seen rising to plus 27 in January.

Retailers, real estate/construction industries and "other services" industries dragged down the overall sentiment in October.

Confidence is seen rising at all but one non-manufacturing sector; information and telecommunications. Its sentiment index is up eight points to plus 50 this month but is then seen falling back to five points to plus 45 in January.

Japan's growth has outpaced its Group of 7 rich-country peers so far this year, but whether that growth can be sustained remains to be seen as capital spending -- a weak spot in the economy -- has only recently started to show tentative signs of recovery.

The BOJ's latest tankan on October 1 showed the big manufacturers' sentiment index jumped in July-September to a nearly six-year high, with large companies planning to raise capital spending by 5.1 percent in the current business year to next March.

At its October 3-4 policy review, the central bank raised its view on capital spending to say it was picking up, while keeping intact the monetary stimulus it launched in April, aiming at reaching a 2 percent inflation goal in roughly two years.

(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)

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