* Manufacturers' July sentiment index +19, seen at +21 in
* Service-sector index +23 in July, seen at +29 in Oct
* Reuters Tankan strongly correlates with BOJ tankan
By Tetsushi Kajimoto
TOKYO, July 17 Confidence among Japanese
manufacturers held steady for a second straight month in July
and is seen likely to edge up, a Reuters poll found, offering
further evidence of sentiment gradually recovering from April's
sales tax hike.
Reflecting weak private consumption, the service-sector mood
including retailers slid in July, but it is seen rebounding over
the next three months, according to the Reuters Tankan poll of
400 big firms between June 30 and July 14, of which 280 replied.
The Reuters Tankan, which closely correlates with the Bank
of Japan's key tankan survey, supports the central bank's view
that the economy is on track for a moderate recovery.
However, the lack of a growth engine clouds the economic
outlook, with companies expressing their concerns about a big
drop in demand after the April 1 sales tax hike and stagnant
exports - particularly to China.
"Our sales dropped more than expected in May and June in
reaction to the sales tax hike. The Chinese market remains
sluggish as well," a chemicals firm said in the Reuters poll.
"The U.S. economy is firm but the world economy on the8
whole lacks momentum, particularly with the Chinese economy
likely to remain sluggish for a long time," a nonferrous metal
Companies including oil refiners and food manufacturers
blamed the high costs of oil and raw materials for squeezing
their profits, while some others said they were facing supply
constraints, such as labour shortages, that have delayed
In the Reuters Tankan, the sentiment index at manufacturers
stood at plus 19, unchanged from June. The service-sector gauge
was at plus 23 in July, down 6 points from the prior month.
Indexes are calculated by subtracting the percentage of
pessimistic responses from optimistic ones.
The indexes for manufacturers and non-manufacturers are
expected to improve to plus 21 and plus 29 respectively in
October, meaning that optimists far outnumber pessimists.
The last BOJ tankan showed on July 1 that big manufacturers'
mood soured in the three months to June but was seen improving
in the current quarter, with large firms planning to raise
capital spending more than initially estimated this fiscal year.
That finding did not quite tally with core orders for
machinery falling a record 19.5 percent in May from the previous
month in a highly volatile data series that is, however,
regarded as an indicator of capital spending in the coming six
to nine months.
The BOJ stuck to its massive monetary stimulus at a policy
review on Tuesday. It trimmed its economic growth forecast for
this fiscal year as exports remain weak and household spending
tumbled after the sales tax rise.
The bank's nine-member board maintained its inflation
projections and stuck to the view the economy would continue
recovering moderately as the impact of the tax rise faded.
(Editing by Eric Meijer)