By Makiko Yamazaki and Leika Kihara
TOKYO (Reuters) – Japanese big manufacturers’ business sentiment was steady in the three months to September, a closely watched central bank survey showed on Tuesday, a sign the economy continues to recover despite weakness in global growth.
Big non-manufacturers’ mood improved, the Bank of Japan’s (BOJ) “tankan” survey showed, underscoring the strength of domestic demand.
The tankan will be among key factors the BOJ will scrutinise in setting monetary policy and releasing fresh growth and inflation forecasts at its next meeting on Oct. 30-31.
The headline index for big manufacturers’ confidence stood at +13 in September against +13 in June and in line with a median market forecast.
The sentiment index for big non-manufacturers stood at +34, up from +33 in June. It compared with market forecasts for a reading of +32.
Big companies expect to increase capital spending by 10.6% in the fiscal year to March 2025, the tankan showed, smaller than a median forecast for a 11.9% gain.
Big manufacturers expect conditions to improve three months ahead, while non-manufacturers project conditions to worsen, the tankan showed.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was making steady progress towards durably achieving its 2% inflation target.
BOJ Governor Kazuo Ueda has said the central bank will continue to raise rates if companies keep hiking prices and wages due to optimism over the outlook, and help keep inflation durably around its 2% target.
Japan’s economy expanded an annualised 2.9% in the second quarter as steady wage hikes underpinned consumer spending. Capital expenditure continues to grow, though soft demand in China and slowing U.S. growth cloud the outlook for the export-reliant country.
The tankan’s sentiment diffusion indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.