By Kaori Kaneko
TOKYO (Reuters) – Confidence at big manufacturers in Japan in the three months to December likely worsened to its lowest in nearly seven years, a Reuters poll showed on Friday, as the U.S.-China trade war, a sales tax hike and a huge typhoon knocked the economy.
The Bank of Japan’s quarterly tankan business sentiment survey is expected to show the headline index for big manufacturers’ confidence fell to plus 2 in December from plus 5 three months earlier, the poll of 14 economists found.
That would mark the fourth quarter of worsening confidence and the gloomiest since March 2013 when the index stood at minus 8 – just a month before BOJ Governor Haruhiko Kuroda set in motion the massive stimulus in April 2013.
The sentiment index for big non-manufacturers is forecast to have deteriorated to plus 17 in December from plus 21 marked in September survey, the poll showed.
“Exports remained weak due to the U.S.-China trade friction and the slowing global economy. Also the sales tax increase and a typhoon added further damages,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
“There are positive factors such as a weaker yen and the IT cycle seems to have started rebounding but they are not strong enough to boost business sentiment.”
The outlook didn’t offer much cheer either. Big manufacturers’ business confidence was seen recovering just a touch in the coming quarter to plus 3, while non-manufacturers’ sentiment was expected to edge down to plus 16, the poll found.
Big companies were forecast to raise their capital spending plans by 6.0% for this fiscal year to March 2020, down from 6.6% projected in the September survey.
The BOJ will release its tankan survey at 8:50 a.m. on Dec. 13 (2350 GMT on Dec. 12).
Q3 GDPSEENREVISED UP SLIGHTLY
A separate Reuters poll of 19 economists forecast Japan’s gross domestic product (GDP) will be revised up to an annualised growth of 0.7% in the third quarter from the initial estimate of a 0.2% rise.
That would translate into 0.2% growth quarter-on-quarter after the initial reading showed the world’s third-biggest economy ground to a near standstill to expand just 0.1%.
The U.S.-China trade war and global slowdown have carved out output in the export-led nation, and many market players bet the economy will contract in the current quarter, as consumption takes a hit from the sales tax hike to 10% from 8% which kicked in from Oct. 1.
Capital spending was seen as the main driver behind the expected upgrade to growth, with the poll projecting it to have risen 1.7% in July-September, up from 0.9% growth in the preliminary reading.
“There is no change to our view on the economy that weak foreign demand weighed on the growth, while domestic demand lacked momentum,” said Kentaro Arita, senior economist at Mizuho Research Institute.
Next week data also include core machinery orders, which are expected to have risen 0.9% in October from the previous month, up for the first time in four months, the poll found.
“The expected gains were more likely rebounds from falls in the past. Corporations remain cautious about business investment as the outlook is unclear,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
From a year earlier, core orders, which exclude those for ships and electric utilities, were seen down 1.8% in October after rising 5.1% in September.
The Cabinet Office will release revised GDP for the third quarter on Dec. 9 at 8:50 a.m. Japan time (2350 GMT, Dec. 8) and machinery orders on Dec. 12.
(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)