* Manufacturers' March sentiment index +18, service sector
* Index seen down due to drop in demand after sales tax hike
* BOJ tankan likely show steady readings for March sentiment
By Tetsushi Kajimoto
TOKYO, March 19 Confidence at Japanese
manufacturers held steady in March but is seen weakening over
the next three months, a Reuters poll showed on Wednesday as
firms prepare for a sales tax rise next month that some expect
will hurt economic momentum.
Sentiment at non-manufacturers, including retailers who have
benefited from consumers bringing forward purchases to beat the
tax rise, rose 1 point to a record high of plus 31 points, the
Reuters Tankan for March showed.
However, the monthly Reuters survey, which closely
correlates with the Bank of Japan's tankan, showed the
service-sector mood index is expected to drop to plus 14 points
Compared with three months ago, the Reuters Tankan showed
sentiment for both manufacturers and service-sector firms had
improved slightly, pointing to steady readings in the BOJ's
A total of 255 firms responded to the poll of 400 big- and
medium-sized firms taken March 3-14. Indexes are calculated by
subtracting the percentage of pessimistic responses from
The BOJ will release its March quarter tankan on April 1,
the same day the sales tax rises to 8 percent from 5 percent.
Any weakness in the BOJ tankan would increase calls for
additional stimulus from the BOJ, even though the central bank
has said the economy should be able to weather the tax rise.
"Our business conditions are good because the yen is stable
at above 100 yen per dollar and domestic demand is rising before
a sales tax hike," a machinery maker said in its survey
But other firms are seeing margins squeezed by higher import
costs and sluggish demand in China and other Asian markets.
"China's economy remains sluggish, and we're also concerned
that the U.S. economy may lose momentum and the global economy
may slow due to friction between Russia and Western countries
over Ukraine," said a non-ferrous metal company.
In the Reuters Tankan, the index of sentiment among
manufacturers held at plus 18, unchanged from February and up 1
point from December. At plus 31 points, the service-sector gauge
was up 6 points from three months ago.
The indexes for manufacturers and non-manufacturers are
expected to weaken to plus 12 and plus 14 respectively by June.
Among manufacturers, the autos/transport equipment sector
led the decline, with its sentiment index seen falling from plus
13 in March to minus 14 in June.
Retailers are also expected to be hit hard by the sales tax
rise. Their sentiment index jumped to plus 38 in March from plus
12 in the previous month on a rush of last-minute demand, but it
is seen plunging to minus 19 in June.
The BOJ's December-quarter tankan showed business sentiment
hit a six-year high, but big manufacturers and non-manufacturers
expected business conditions to weaken in March.
At a policy review last week, the BOJ maintained its massive
monetary stimulus and kept its upbeat view on the economy,
although it downgraded its assessment of exports.
Policymakers and many private-sector economists expect the
economy to slow temporarily in the April-June quarter after the
tax rise before rebounding in July-September.