TOKYO (REUTERS) - Japanese manufacturers' confidence worsened for the second straight month and is expected to fade going forward, a Reuters poll showed on Thrsday (Oct 15), adding to lingering fears of a recession and keeping policymakers under pressure to deploy fresh stimulus.
Service-sector sentiment bounced from the prior month's fall but is seen worsening again over the next three months, in a sign of the fragility in private consumption which accounts for roughly 60 per cent of the economy.
The Reuters Tankan - which closely tracks the Bank of Japan's tankan survey - came as a recent run of weak data including surprise drops in factory output and machinery orders cast doubt on the strength of business activity.
The bleak business outlook could undermine policymakers'efforts to generate a virtuous cycle of growth and investment led by the private sector, which is crucial for the BOJ's rosy projections that the economy is on track to hit its ambitious 2 per cent price goal next year.
The poll of 515 big and mid-sized companies between Sept 30 and Oct 9, of which 268 responded, showed companies are struggling with sluggish demand both at home and abroad as slowdown in China and emerging markets clouds the outlook. "Orders have been put off notably. This usually happens when sales slow at our manufacturing clients. The economy seems to me to be in a downtrend," a manager at an electric machinery maker said in the survey, which companies answer anonymously.
A chemicals producer said: "Declines in oil prices have hampered our negotiations with clients for price increases (to pass on costs). We also feel a lack of strength in demand."
The Reuters Tankan sentiment index for manufacturers fell to 7 in October from 9 in September, matching a low hit in May 2013, dragged down by sectors including oil refinery, chemicals, food and cars. The index is seen unchanged in January.
The service-sector index rose to 27 from 23 in September, led by retailers and transport firms. The index compared with a record high of 36 in June and is seen falling to 24 in January.
The Reuters Tankan followed mixed readings in the last BOJ tankan on Oct 1 that showed big manufacturers' morale fell in the three months to September but the service sector's mood rose to a more than a two-decade high.
The BOJ has stood pat since it expanded its massive monetary stimulus last October. Lingering fears of recession keep alive expectations for the central bank to act on Oct 30, when it reviews its long-term economic and price outlook.