UPDATE 3-Reuters survey points to improved BOJ tankan

* Improved corporate mood points to stronger BOJ tankan

* Recovery helps ease pessimism in service-sector

* Companies could revise up capital expenditure plans

* Manufacturers worried by Europe debt problems
(Adds details)

By Izumi Nakagawa and Rie Ishiguro

TOKYO, June 17 (BestGrowthStock) – Japanese manufacturers are the
most optimistic about economic conditions in more than two
years, a Reuters poll shows, suggesting the Bank of Japan’s
influential tankan survey due next month will similarly improve.

A close correlation between the Reuters poll and the BOJ
tankan report suggests the central bank survey will show that
big manufacturers’ sentiment for the second quarter rose to
around zero, a two-year high, from minus 14 in March.

The BOJ uses its tankan report to guide policy but the
improvement in business sentiment is unlikely to prompt any new
action from the central bank because it largely reflects its
expectations for an economy showing a moderate recovery,
economists said.

Strong export growth to fast-growing Asia is lifting
manufacturers’ sentiment. In a sign a pickup in the economy is
broadening, the Reuters poll also showed that service-sector
firms were far less pessimistic than three months earlier and
that they would become optimistic in the next three months.

“The rebound in external demand is proceeding much better
than I expected,” said Yuichi Kodama, an economist at Meiji
Yasuda Life Insurance.

“Capital expenditure will improve in the second half of the
year because production is doing so well. But we are still in
deflation, and this leaves room for the government to request
more of the BOJ.”

The BOJ tankan is due to be released on July 1.

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Graphic on Reuters, BOJ surveys: http://r.reuters.com/fyg32m

For related tables, click on [ID:nTOE65F02N]

More stories on Japan economy [ID:nECONJP]

Rtrs Asia Company Sentiment poll:http://r.reuters.com/zug52m

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The manufacturers’ sentiment index for June in the Reuters
Tankan rose by 17 points from March to plus 9, its highest level
since February 2008.

It shows that sentiment turned optimistic during the
April-June quarter and back to levels experienced before the
collapse of Lehman Brothers in September 2008.

The Reuters poll also said the sentiment index is expected
to climb a further 5 points to plus 14 in September.

TURNING?

The last BOJ tankan in March showed pessimism was still
greater than optimism as the index for large manufacturers was
minus 14. [ID:nTOE61E037]

Meiji Yasuda Insurance’s Kodama said that based on the
Reuters poll outcome, he expects the BOJ tankan to show that
optimism and pessimism were evenly matched, taking the index to
zero.

Companies are likely to revise up their capital spending
plans later this year as the economy recovers, analysts say.
That would be a welcome sign of improvement as the BOJ’s
previous tankan survey showed firms very cautious about
spending.

Manufacturers are concerned about the euro area’s debt
crisis and the impact on demand from a weak euro. But economists
said the crisis could prove less of a risk so long as Asian
economies, including China, continue to show strong export
demand.

“Sovereign debt woes are certainly bad for Europe, but with
China growing and the U.S. economy improving, this is supporting
Japanese corporate sentiment,” said Yasuo Yamamoto, a senior
economist at Mizuho Research Institute. “The BOJ’s tankan is
also likely to show improvement.”

Japan’s economy grew 1.2 percent in January-March, outpacing
growth in the United States and Europe, thanks to brisk exports.
[ID:nTOE658045]

The Reuters index for service-sector firms improved to minus
8 from minus 22 in March and is expected to rise to plus 5 in
September, with retailers, whose sentiment hit a record low in
December, showing a marked improvement.

Economists expect growth to slow in the following quarters
as government stimulus targeting the consumption of
energy-efficient products fades and European debt woes cloud the
outlook for currencies.

“Although orders are coming in as expected, the yen’s
appreciation against the dollar and the euro is not favourable
in terms of profitability,” an electrical appliance maker said
in the Reuters Tankan.

The dollar has fallen to around 91 yen (JPY=: ) from more than
100 yen early last year, while the euro earlier this month
dropped to its lowest against the yen in more than eight years.

The Reuters Tankan covers 200 large manufacturers and 200
services sector firms excluding the financial sector. A total of
226 responded to the poll, taken May 28-June 14.

Indexes in the Reuters Tankan are calculated by subtracting
the percentage of pessimistic respondents from optimistic ones.
A negative figure means pessimists outnumber optimists.

Stock Report

(Editing by Michael Watson and Neil Fullick)

UPDATE 3-Reuters survey points to improved BOJ tankan