UPDATE 1-Japan corp mood turns positive after quake-Reuters Tankan

(Adds analyst quote)

* Manufacturing sentiment DI +1 in July, service sector +3

* Manuf mood in Oct seen improving to +17, non-manuf to +10

* Reuters poll correlates closely with BOJ tankan

By Tetsushi Kajimoto and Izumi Nakagawa

TOKYO, July 14 (Reuters) - Confidence at Japanese companies turned positive in July for the first time since the March 11 earthquake devastated the country's northeast coast, a Reuters poll showed, pointing to a return to moderate economic growth later in the year.

The monthly Reuters Tankan poll, which has a 95 percent correlation with the Bank of Japan's closely watched quarterly tankan survey, showed sentiment among both manufacturers and non-manufacturers is set to improve further in the coming quarter.

The survey lends weight to the dominant view that companies are gradually recovering from the initial shock of the quake and subsequent tsunami, which triggered the worst nuclear crisis in 25 years and pushed the economy into its second recession in three years.

"The outlook of both manufacturers and non-manufactures is strong, especially automakers. This confirms that the recovery has been progressing since the disaster," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

"Although there are worries over power supply shortages, manufacturers are probably expect ing firm demand both domestically and from overseas."

The BOJ's latest tankan survey showed big Japanese manufacturers turning pessimistic about business conditions for the first time since the global financial crisis but found that they expect improvement in coming months.

Both surveys chimed with the BOJ's view that the economy will resume a moderate recovery by autumn as companies restore supply chains and factory output rebounds, suggesting the central bank can hold off from easing policy further.

The Reuters Tankan manufacturing sentiment index, derived by subtracting the percentage of pessimistic responses from optimistic ones, edged up four points from June to plus 1, meaning that optimists outnumbered pessimists.

That was the first positive reading in the headline index since March, after it plunged by a record amount in April following a record fall in industrial output triggered by the magnitude 9.0 earthquake and deadly tsunami.

The index for non-manufacturers jumped 13 points from June to plus 3, also the first positive number since March.

The survey, taken from June 27 to July 11, canvassed 400 big firms, of which 267 responded.

The manufacturing and service-sector sentiment indexes are seen improving to plus 17 and plus 10 respectively in October, compared with plus 15 and plus 3 seen in the March survey, taken just before the disaster.

"Orders have been restored to 90 percent of those expected before the quake, but impact from the disaster still lingers," one autos/transport equipment firm said in the survey.

Companies in the Reuters poll also voiced concerns about power constraints and slowdown in the United States and China -- the key markets for export-reliant Japan -- while a strong yen and commodity price hikes threaten to squeeze profits.

In a sign that damage wrought by the March disaster is largely on the mend, Japan's industrial output jumped in May by the most in nearly 60 years, suggesting a "V-shaped" recovery.

The BOJ kept monetary policy unchanged and revised up its assessment of the economy on Tuesday, encouraged by a rebound in factory output and increasing signs that the recovery from the disaster is broadening. (Additional reporting by Kaori Kaneko; Editing by Joseph Radford)