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* Big manufacturers' DI +17 vs f'cast +18-tankan
* Big non-manufacturers' DI +24, matches f'cast
* FY2014/15 capex spending plan slows from previous yr
* Survey keeps BOJ under pressure for further easing
By Leika Kihara and Tetsushi Kajimoto
TOKYO, April 1 Japanese business sentiment
barely improved in the three months to March and is set to sour
in the following quarter, a closely watched central bank survey
showed, underscoring the challenges facing Prime Minister Shinzo
Abe in his efforts to reflate the economy out of stagnation.
Big firms expect to increase capital spending only modestly,
the BOJ's tankan quarterly survey showed on Tuesday, reflecting
uncertainty over how much a sales tax hike that kicked off on
Tuesday could hurt a fragile economic recovery.
The data will likely keep alive market expectations the BOJ
may ease policy further in coming months if the pain from the
tax hike proves to be much bigger than estimated, analysts say.
The headline index for big manufacturers' sentiment rose by
one point from three months ago to plus 17, the tankan showed,
marking the fifth straight quarter of improvement but slightly
short of a median market forecast of plus 18. The rise was
smaller than a 4-point gain in the previous survey in December.
Big service-sector sentiment also improved by 4 points to
plus 24, matching a median market forecast, as consumers rushed
to beat the April sales tax hike.
The tankan's diffusion index (DI) is calculated by
subtracting the number of firms which say business conditions
are worse from those which feel they improved. A positive
reading means optimists outnumbered pessimists.
But both big manufacturers and non-manufacturers expect
conditions to worsen three months ahead, the tankan showed, as
they brace for a slump in spending after the tax hike that comes
even as exports remain sluggish.
Big firms expect to increase capital spending by 0.1 percent
in the new financial year starting this month, compared with a
median market forecast for a 0.2 percent rise, the tankan
showed. That is a marked slowdown from a 3.9 percent increase in
spending plans for the fiscal year that ended in March.
Growth in the world's third-largest economy slowed in the
final quarter of last year as the effect of Abe's reflationary
policies began to fade. Analysts expect the economy to contract
in April-June due to a pullback in consumption after the tax
hike, before returning to moderate growth in following quarters.
A Reuters poll showed analysts expect the BOJ to ease again
by July, despite reassurances by the bank the economy can
withstand the tax hike without further stimulus.
The tank survey will be among data the BOJ board members
will scrutinise when they meet for a rate review next week. The
central bank is widely expected to keep monetary policy steady
at the meeting, preferring to wait at least a few months to
evaluate out the degree of pain from the sales tax hike.
(Additional reporting by Stanley White; Editing by Eric Meijer)