UPDATE 2-Japan corp mood tumbles, BOJ tankan likely bleak -poll

* Manuf sentiment index at +7, down 10 points from Sept

* Manuf optimism seen vanishing in March -Reuters Tankan

* Yen, slowing exports, waning demand compound corp woes

* BOJ tankan likely to worsen from previous survey in Sept

* Coincident indicator down, govt says econ at standstill
(Adds coincident indicator index, forex background)

By Izumi Nakagawa

TOKYO, Dec 7 (BestGrowthStock) – The mood among Japanese
manufacturers tumbled in December and their optimism is seen
vanishing in three months, a Reuters poll showed, underscoring
mounting uncertainty over an economy already struggling with
waning demand at home and abroad.

Companies complained about rises in raw materials prices and
difficulty in passing on costs to customers as a strong yen and
global slowdown hurt profits, according to the monthly poll
taken Nov. 17-Dec. 2 of 400 big firms, of which 220 responded.

The bleak reading bodes ill for the Bank of Japan’s closely
watched quarterly tankan survey due out on Dec. 15, which will
keep the central bank under pressure to maintain its ultra loose
monetary policy to underpin the flagging economy.

“The impact of a strong yen, slowing exports and declines in
profits weighed on corporate sentiment and companies are growing
more cautious about the outlook,” said Yoshimasa Maruyama, an
economist at Itochu Corp.

“This trend is likely to be confirmed in the BOJ tankan.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Reuters Tankan: http://link.reuters.com/cyg68q More stories on the Japanese economy: [ID:nECONJP] Reuters tankan table: [ID:nTOE6B503Z] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The monthly Reuters Tankan, which started in 1998 and has a
95 percent correlation with the BOJ tankan, highlighted concerns
that slowing exports and the waning impact of government
stimulus are likely to trigger a fall in GDP in the current
quarter.

Many economists expect Japan’s economy to begin growing
again next year, as Asia’s emerging economies power ahead and
the yen stabilises after coming close to a record high last
month, but the euro zone’s debt woes have added to uncertainties
on the horizon and kept growth forecasts modest.

AT STANDSTILL

In a sign the economy’s recovery is grinding to a halt,
Japan’s coincident indicator index fell a preliminary 1.4 points
in October from the previous month, down for the second straight
month, the Cabinet Office said. [ID:nTKU106403]

The government cut its assessment on the index, compiled
using data such as industrial output and manufacturing overtime,
and said it showed the economy was at a standstill.

In the Reuters Tankan, the manufacturing sentiment index,
derived by subtracting the percentage of pessimistic respondents
from optimistic ones, fell 9 points from November and 10 points
from three months earlier to plus 7, its lowest figure since
May.

The service-sector mood edged up 1 point to minus 12. It has
stayed below zero, meaning pessimists outnumber optimists, since
June 2008.

Sentiment is seen sliding to zero in the manufacturing
sector but improving to minus 10 in the service sector in the
three months to March.

Maruyama said he expects the BOJ tankan’s index for big
manufacturers to be plus 2 and that alone would not prompt an
immediate BOJ move. Others were more pessimistic.

“If capital spending plans and other components of the BOJ
tankan heighten downside risks for the Japanese economy, they
might prompt the BOJ to take further action at its Dec. 20-21
meeting,” said Naoki Iizuka, a senior economist at Mizuho
Securities.

Adding to companies’ cautious view on the outlook, the
dollar hit a three-week low against the yen below 82.50 yen
(JPY=: ) on Tuesday, sending Tokyo stocks lower, while the euro
came under renewed pressure as Europe struggled to contain its
debt crisis.

“The situation is not very good despite growth in Asia as
domestic consumption cools and the U.S. faces a high jobless
rate and tame personal consumption,” one electric machinery firm
said.

Economists polled by Reuters expect the economy to shrink
0.1 percent this quarter as exports slow and auto output slumps
after the expiry of government incentives for purchases of
low-emission cars. [ID:nSLA9ME6I3]

The BOJ, worried by economic uncertainty, has eased policy
by pledging to keep rates effectively at zero until the end of
deflation is in sight and to spend 5 trillion yen ($60 billion)
on assets ranging from government bonds to corporate debt.

The BOJ has said that expanding the fund is a clear option
if the looming slowdown proves worse than expected. But the
yen’s retreat from 15-year highs scaled early last month makes
any radical near-term action unlikely. [ID:nL3E6MI0E3]

In the last BOJ tankan in September, manufacturers turned
more pessimistic about their outlook for the first time in
almost two years in a sign that a strong yen could derail the
export-led economic recovery. [ID:nTOE68R09G]

While the Reuters Tankan has a close correlation with the
BOJ tankan, the two surveys target different types and numbers
of sample firms.
($1=82.55 Yen)
(Additional reporting by Kaori Kaneko; Writing by Tetsushi
Kajimoto; Editing by Michael Watson and Joseph Radford)

UPDATE 2-Japan corp mood tumbles, BOJ tankan likely bleak -poll