UPDATE 1-Japan business mood to worsen, hit by strong yen

* Big manufacturers’ Q3 sentiment improves vs Q2 – survey

* Big manufacturers less optimistic about Q4 – survey

* Companies worried about slowing overseas growth, strong yen
(Adds analyst quotes, details)

By Kaori Kaneko

TOKYO, Sept 9 (BestGrowthStock) – Big Japanese manufacturers expect
conditions to worsen in the final three months of 2010 as they
feel the pinch from slowing overseas growth and a strong yen, a
government survey showed, despite a pick-up in optimism in the
business environment in the July-September quarter.

Strong shipments to Asia have underpinned Japan’s
export-reliant economy in the July-September period, but the
recent surge in the yen is expected to hit corporate profits and
the boost from government stimulus is fizzling out.

The weaker outlook will likely add pressure on Japanese
policymakers to come up with measures to support the economy and
curb gains in the yen, which hit a fresh 15-year high against the
dollar on Wednesday. (JPY=: )

“Companies are becoming increasingly cautious about the
economic outlook due to slowing exports and the yen’s
appreciation,” said Yoshiki Shinke, senior economist at Dai-ichi
Life Research Institute.

“Business sentiment will likely get a boost if policymakers
take steps to arrest the yen’s rise and intervention is likely to
prove effective, although chances of such action are still
small.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ A PDF presentation on the yen: http://r.reuters.com/nef47n Graphic of business sentiment: http://link.reuters.com/huv32p More stories on Japan's economy [ID:nECONJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Japanese officials have been trying to talk down the yen but
so far their comments have had little effect, overshadowed by
investor worries about a slowdown in the global economy and the
health of the European banking system. [ID:nTOE687026 ]

The Bank of Japan has indicated it is willing to ease
monetary policy to help the economy, but it is likely to wait
until after the ruling party settles a leadership contest on
Sept. 14.

The business survey index (BSI) of sentiment at large
manufacturers stood at plus 13.3 in July-September, higher than
plus 10.0 in April-June, according to the joint survey by the
Ministry of Finance and the Economic and Social Research
Institute, an arm of the Cabinet Office.

But large manufacturers expect the sentiment index to worsen
to a flat reading in October-December, far worse than plus 12.7
in the previous survey conducted three months ago.

The survey comes ahead of the Bank of Japan’s closely watched
tankan business sentiment survey due on Sept. 29, which will be
key to whether the central bank will ease monetary policy further
next month.

The BSI measures the percentage of firms that expect the
business environment to improve from the previous quarter minus
the percentage that expect it to worsen.
(Writing by Leika Kihara)

UPDATE 1-Japan business mood to worsen, hit by strong yen