Japan firms' mood dips as emerging economies slow -Reuters Tankan
* Manufacturers' sentiment index +12, service sector +20
* Index seen up in three months, recovery spreading albeit slowly
* Reuters poll suggests tepid gains in BOJ Sept tankan
By Tetsushi Kajimoto and Izumi Nakagawa
TOKYO, Sept 19 (Reuters) - Confidence among Japanese manufacturers slipped in September from a three-year high the previous month, a Reuters poll showed on Thursday, as concerns about slowing growth in emerging markets hit exporters and a weaker yen pushed up import costs.
Prime Minister Shinzo Abe's reflationary policies and central bank stimulus drove share prices higher and weakened the yen through much of the first half of 2013, helping exporters and boosting sentiment in the world's third-largest economy
Since mid-year, the market gains have plateaued, a planned sales tax rise has been a major political issue and some major emerging markets have been badly hit by capital outflows.
The index of sentiment at manufacturers fell to plus 12 in September, its lowest since May, from 16 in August in the monthly Reuters poll, which is strongly correlated with the Bank of Japan's tankan poll.
The index, calculated by subtracting the percentage of pessimistic responses from optimistic ones, is seen rebounding to plus 19 in December, according to the poll of 400 large and medium-size firms, of which 275 responded between Aug. 30-Sept. 13.
"We cannot expect a swift recovery in demand as China has not bottomed out," a non-ferrous metal maker said in the poll.
A transport equipment firm said: "Demand in emerging market economies and Europe are undershooting our forecasts."
Growth prospects of emerging markets have been hit by an outflow of capital in recent months on signs the U.S. Federal Reserve was readying to trim its monetary stimulus. Among the hardest hit were India and Indonesia, which rely on foreign capital to fund current account deficits.
SALES TAX HIKE
The service-sector sentiment gauge fell to plus 20 in September from plus 23 in the previous month, which was the highest level since April 2007. It is expected to rebound to plus 23 in December.
Compared with three months ago, the manufacturers' index was down 3 points, while the service-sector index was unchanged, pointing to tepid gains in the BOJ's closely-watched quarterly tankan survey, due on October 1.
The BOJ's previous tankan in July showed manufacturers' mood turned positive in April-June for the first time in nearly two years, and was seen rising further.
The central bank upgraded its assessment of the economy earlier this month to say it was recovering moderately. In the Reuters Tankan, however, many firms said they did not feel a fully fledged recovery was taking hold.
Sectors such as textiles/paper and food also complained about rising raw materials costs due to a weak yen.
"Our profits have improved due to the effect of a weak yen, but the situation is not necessarily good as sales remain patchy on the local currency basis," an electric machinery maker said.
"The economy may be in a recovery trend, but people in the medium- to low-income group are tightening their belt amid worry about sales tax hikes while their incomes have hardly improved," a textile product maker said.
Japan's economy grew an annualised 3.8 percent in the second quarter, driven in large part by strong consumer spending, boosting the case for Abe to go ahead with a planned sales tax hike next year.
The BOJ's tankan will be one of the factors Abe considers before an expected decision on the sales tax in early October.
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