TOKYO • Business confidence among Japan's largest manufacturers is at its lowest since Tokyo introduced measures to kick-start the struggling economy more than three years ago, a central bank survey showed yesterday.

The Bank of Japan's (BOJ) closely watched Tankan report comes after data showing weak growth in the second quarter and as soft inflation and spending figures last Friday underscored the wobbly recovery. The latest Tankan - a key index of Japan Inc's health - missed market forecasts of a slight improvement in the mood of major firms.

Sentiment among big manufacturers is at its lowest level since Prime Minister Shinzo Abe kicked off his growth blitz in 2013.

The survey contradicts the government's view that the world's No. 3 economy is on the upswing, said Mr Satoshi Osanai, senior economist at the Daiwa Institute of Research. "The economy is weak and certainly not in a recovery mode," he said. "This is more confirmation that Japanese firms are facing headwinds."

The BOJ's quarterly survey of more than 10,000 companies is the most comprehensive indicator of how Japan is faring. It marks the difference between the percentage of firms that are upbeat and those that see conditions as unfavourable. The reading for big manufacturers was unchanged at 6, while the level for big non-manufacturers fell to 18 from 19. Confidence among small and medium-sized businesses improved slightly.

Investors were unfazed, however, with the Nikkei up 0.9 per cent.

Officials are under huge pressure to deliver a boost to the economy with experts increasingly writing off Tokyo's spend-for-growth policy which aims to kickstart growth.

Last month, the BOJ said it would switch its emphasis from interest rates and concentrate its firepower on 10-year government bonds - the latest bid to convince Japanese consumers that the price of goods and services will rise in the future.

But some analysts said the move was an admission of defeat in the war on deflation and a warning on the limits of central bank power.

"I'm sure the BOJ was hoping for a rebound in the latest Tankan - they must be in agony looking at this report," said former BOJ official Hideo Kumano, now an economist at the Daiichi Life Research Institute.

AGENCE FRANCE-PRESSE