By Leika Kihara and Kaori Kaneko
TOKYO (Reuters) - Japanese big manufacturers' business mood was at its bleakest in nearly seven years in the fourth quarter, a closely watched central bank survey showed, as the U.S.-China trade war and soft global demand weighed on the export-reliant economy.
Non-manufacturers' business sentiment also worsened, according to the Bank of Japan's "tankan" quarterly survey released on Friday, as an increase in the domestic sales tax from October took a toll on consumption.
The glum readings will likely keep the BOJ under pressure to maintain or even ramp up its massive stimulus programme to fend off the risk of another recession.
The headline index for big manufacturers' sentiment stood at 0 in December, down from plus 5 in September and worse than a median market forecast of plus 2, according to the survey.
The tankan's sentiment 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.
It marked the fourth straight quarter of decline and hit the lowest reading since March 2013, a month before BOJ Governor Haruhiko Kuroda deployed his "bazooka" monetary stimulus to pull Japan out of deflation.
The index for big non-manufacturers stood at plus 20, sliding from plus 21 in September but exceeding a Refinitiv estimate of plus 17.
Big manufacturers and non-manufacturers expect business sentiment to remain flat or worsen further in the next three months, the survey showed, a sign companies remain cautious on the outlook due to uncertainty over global trade tensions.
Big firms plan to increase capital expenditure by 6.8% in the current business year ending in March 2020, compared with a median market forecast of a 6.0% gain, according to the survey.
Capital expenditure has been among the few bright spots in Japan's economy as companies continue to invest in high-tech and labour-saving technology to cope with a labour crunch.
The central bank will closely scrutinise the tankan results at its Dec. 18-19 policy-setting meeting. Many investors see the BOJ in no mood to ease policy further anytime soon.
Japan's economy expanded at a much faster pace than initially reported in the third quarter, as solid domestic demand and business spending offset the pain from weak exports and output, although many analysts anticipate a slowdown this quarter.
(Reporting by Leika Kihara; Editing by Shounak Dasgupta & Shri Navaratnam)
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Updated Date: Dec 13, 2019 06:08:52 IST