UPDATE 2-Japan manufacturer optimism seen fading-Reuters Tankan

* Manufacturer index at +19 in Oct, up 2 pts from Sept

* Index seen down by record margin to zero in 3 mths to Jan

* Companies hurt by yen’s jump to 15-year high
(Adds details)

By Izumi Nakagawa

TOKYO, Oct 18 (BestGrowthStock) – Japanese manufacturer confidence
held steady in October from the previous month but is seen
deteriorating by a record margin over the next three months as
companies grapple with the yen’s surge, a Reuters poll showed.

Many companies complained about the harm the strong yen has
inflicted on their operations, in part by reducing the price
competitiveness of their products abroad, and about slowing
demand in the United States and Europe.

The result bodes ill for the Japanese government as it
struggles to support the fragile economy with additional
stimulus, with the effect of its yen-selling intervention on
Sept. 15 all but vanished and the yen back at fresh 15-year highs
against the dollar.

“Uncertainty over the outlook of overseas economies is
heightening among manufacturers,” said Tatsushi Shikano, senior
economist at Mitsubishi UFJ Morgan Stanley Securities.

“Market moves are hurting sentiment as well, particularly
with yen levels so high.”

The poll, which has a 95 percent correlation with the Bank of
Japan’s closely watched quarterly tankan survey, indicated
manufacturer optimism will disappear completely in the next three
months while service-sector pessimism will deepen.

The close correlation means that the central bank’s next
survey in December will likely show that big manufacturers’
sentiment worsened for the first time in two years and turned


Graphic on Reuters tankan: http://link.reuters.com/wyt48p

More stories on the Japanese economy [ID:nECONJP]

Reuters tankan table: [ID:nTOE69D051]

PDF on currency war: http://r.reuters.com/gez77p


In the October poll, the manufacturers’ sentiment index edged
up 2 points from September to plus 19, but is seen deteriorating
to 0 in the three months to January next year, for the biggest
decline since the survey started in 1998.

Service-sector sentiment fell to minus 6 from minus 4 and has
stayed in negative territory since June 2008, the Sept. 27-Oct.
13 survey showed.

Service-sector sentiment is seen worsening further to minus
12 over the three months to January.

A negative figure means pessimists outnumber optimists.

“The price competitiveness of our products has started
declining due to the yen’s rise against the dollar and the euro,”
an electrical appliance maker said.

An automaker said uncertainty about the future had been
magnified by the September expiry of government subsidies for
low-emission vehicles.

Some respondents also expressed concerns about the recent
fraying of ties between Japan and China.

The BOJ’s tankan last month showed Japanese manufacturers
turned more pessimistic about their outlook for the first time in
almost two years. [ID:nTOE68R09G]

The central bank surprised markets earlier this month by
cutting rates and pledging to pump more money into the struggling
economy with a new scheme to buy assets ranging from government
bonds to exchange-traded funds. [ID:nTOE69305D]

But the announcement brought only a short-lived retreat in
the yen, as speculation heightened that the U.S. Federal Reserve
would embark on a second round of quantitative easing as early as

The Reuters Tankan indexes are calculated by subtracting the
percentage of pessimistic respondents from the percentage of
(Writing by Rie Ishiguro; Editing by Edmund Klamann and Nathan

UPDATE 2-Japan manufacturer optimism seen fading-Reuters Tankan