Japan business confidence sags, outlook weak

TOKYO (Reuters) - Japanese business confidence slipped to the lowest in 1-1/2 years in October and it is seen struggling to rebound, a Reuters poll showed, a further sign Tokyo may be forced to offer fresh policy support to recharge an economy ailing from a sales tax hike.

The loss of confidence follows a slew of weak data - including a shocking drop in factory output and falling household spending - and comes at a time of renewed turbulence in global markets amid worries over weakening global growth.

The deteriorating sentiment could add to pressure on the central bank to ease policy further although BOJ officials look set to refrain from additional stimulus for now.

The sentiment index for manufacturers in the Reuters Tankan, which closely correlates with the Bank of Japan's key tankan survey, fell to 8 in October from 10 in September when it tumbled the most in nearly two years. The index was at its lowest level since May 2013, and it is expected to stay flat in January.

A flagging mood and weak economic data could complicate Prime Minister Shinzo Abe's decision by year-end whether to go ahead with a planned sales tax hike to 10 percent next year.

April's tax hike to 8 per cent from 5 pe rcent pushed the world's third largest economy into the deepest slump in the second quarter since the 2009 global financial crisis

The Reuters poll surveyed 486 big Japanese manufacturers and nonmanufacturers, of which 270 replied during Sept. 30-Oct. 14.

The managers, who responded anonymously to the poll, raised concerns about higher import costs of fuel and raw materials boosted by a weak yen. Tame global growth weighed on the outlook amid lacklustre performance in Chinese and European economies.

The yen hit a six-year low of 110.09 to the dUS ollar earlier this month. It bounced to a more than one-month high of 105.21 on Wednesday after weak U.S. data raised concerns that the Federal Reserve would delay its first interest rate hike.