* Manufacturers' Dec sentiment index +17, service sector +25
* Index seen up further in March, boding well for BOJ tankan
* Recovery broadening helped by demand before sales tax hike
By Tetsushi Kajimoto and Izumi Nakagawa
TOKYO, Dec 9 Confidence at Japanese
manufacturers rose for a second month to a three-year high in
December and is predicted to continue rising, a Reuters poll
found, adding to the evidence of steady recovery in the world's
third largest economy.
The service sector's mood also improved for two consecutive
months to its best reading in more than 6-1/2 years -- a sign of
broadening economic recovery helped by a weak yen and domestic
demand sharpened by a national sales tax hike next April.
Reuters monthly poll of 400 big and midsize firms, of which
268 responded, was held between Nov. 22 and Dec. It bodes well
for next week's Bank of Japan Tankan, with which it is strongly
The sentiment indexes for both manufacturers and
non-manufacturers are seen improving further in the next three
months -- suggesting economic growth will pick up pace towards
the current fiscal year-end in March.
The index of sentiment among manufacturers, derived by
subtracting the percentage of pessimistic responses from
optimistic ones, rose by three points to plus 17 in December,
its highest reading since October 2010.
The index is expected to rise further to plus 22 in March,
meaning optimists far outnumbered pessimists, the poll showed.
"The yen is weakening and demand is materialising ahead of
the planned sales tax hike," said one machinery maker, which saw
its business conditions improving.
"Our business conditions are good although there are some
projects that show no signs of recovery. Still, our performance
turned out better than expected due to effects of a weak yen,"
one chemicals maker said.
While confidence among makers of manufactured goods
including autos and electric machinery steadily improved,
sentiment at some other industries such as textiles/paper and
food struggled, with firms complaining about a weak currency
inflating the import costs of raw materials.
Compared with three months ago, the Reuters Tankan indexes
for manufacturers and service-sector firms were up five points
respectively, signalling steady gains in the BOJ's
closely-watched quarterly tankan survey, due on Dec. 16.
The BOJ's last tankan showed manufacturers' mood jumped in
the three months to September to a near six-year high, with
service sector confidence up a tad, but that both sectors saw
business conditions staying largely unchanged in December.
In the Reuters Tankan survey, the service sector gauge edged
up three points in December from a month ago to plus 25, its
best reading since April 2007. The index is seen rising further
to plus 33 in March.
Retail/wholesale sectors led the gains, suggesting that they
are benefiting from increased spending by consumers ahead of the
planned sales tax hike. None of the non-manufacturers logged
"Sales have grown due to construction demand before the
sales tax hike," one retailer said in the Reuters poll. Another
firm cited brisk new car sales as the reason for improved
Japan's economic growth has outpaced that of its G7 peers
this year, but the pace slowed in July-September as private
consumption and exports moderated. Economists expect growth to
pick up again in the current quarter as consumers rush to buy
goods before the planned sales tax hike.
The BOJ stunned financial markets in April by pledging to
double base money via aggressive asset purchases to achieve 2
percent inflation in roughly two years. The bank's nine-member
board will meet next on Dec. 19-20 to review policy and economic
conditions including its December tankan survey.