* July manufacturers’ sentiment index +25 vs +26 In June
* Service-sector index +34 in July vs +35 in June
* Manufacturers’ mood seen up ahead, service-sector steady
* Reuters Tankan closely correlates with BOJ tankan
By Tetsushi Kajimoto and Izumi Nakagawa
TOKYO, July 19 (Reuters) - Japanese business sentiment slipped in July, a Reuters poll found, reflecting companies’ fear of fallout from an intensifying trade dispute between the United States and China, even though Japan’s economy is expected to bounce back from a first-quarter contraction.
The Reuters Tankan, which tracks the Bank of Japan’s (BOJ) closely watched tankan quarterly survey, found manufacturers’ mood was expected to rebound over the coming three months while service-sector morale was seen as unchanged.
In the Reuters poll of 483 large- and mid-sized companies, many respondents expressed concerns about protectionism, high energy and materials costs squeezing profits, and labour shortages that raised hiring costs. Some 268 firms responded on the condition of anonymity.
“Our clients are increasingly taking a wait-and-see stance on capital expenditure in the face of uncertainty over trade frictions between the United States and China and the EU,” a manager of a machinery maker wrote in the survey.
“Uncertainty is rising over capital spending plans at our client firms due to the expansion of protectionist policies and geopolitical risks,” said another machinery maker.
The sentiment index for manufacturers stood at 25, down one point from the previous month, the survey conducted July 2-13 found.
Food processing, precision machinery, textiles/paper, metal products/machinery and autos/transport equipment were among the industries that dragged down the overall sentiment gauge.
The manufacturers’ index is seen rising to 29 in October.
The service-sector index declined to 34 from 35 in the previous month as the real estate/construction industry’s conviction ebbed.
The index is expected to hold steady in October.
The BOJ’s latest tankan showed big manufacturers’ sentiment soured for a second straight quarter in the three months to June, hurt by rising input costs and as U.S. trade protectionism clouds the outlook for Japan’s export-dependent economy.
Still, the mood among non-manufacturers improved slightly and big firms’ solid capital spending plans offered some relief.
China accused the United States of bullying last week and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 percent import tariffs on $200 billion of Chinese goods.
The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists.
Reporting by Tetsushi Kajimoto and Izumi Nakagawa Editing by Eric Meijer