HIGHLIGHTS-BOJ tankan shows Japan companies less pessimistic

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TOKYO Oct 1 (Reuters) - Japanese business confidence improved as expected in the three months to September, the Bank of Japan's closely watched tankan survey showed, as the economy picks up from its worst slump in decades.

The headline index for big manufacturers' sentiment was minus 33 in September, the corporate survey showed on Thursday, improving from minus 48 in the previous quarterly survey in June.

That matched the median market forecast, pulling further away from a record low hit in March in the wake of the global financial crisis.

Following are key points from a briefing by a BOJ official:

-- The headline index for both big manufacturers' sentiment and big service-sector firms' confidence improved for the second straight quarter.

-- Big manufacturers plan to cut their capital spending by a record 25.6 percent in the fiscal year that started on April 1, according to the September tankan, a downgrade from their forecast for a 24.3 percent fall in spending in the June survey.

-- Big manufacturers expect the dollar to average 94.50 yen JPY= for the financial year to next March 31, a touch weaker than the forecast of 94.85 yen in the previous survey.

-- Both large firms, including manufacturers and non-manufacturers, and small firms downgraded their sales forecasts for fiscal 2009/2010.

-- Big companies' financial conditions index rose 5 points to plus 6, improving for the second quarter and marking the highest level since the December 2008 tankan. (Reporting by Rie Ishiguro)