TOKYO (dpa-AFX) - Japan large manufacturers confidence weakened to a three-year low in the second quarter as trade wars and weak global demand weighed on economic activity, the latest quarterly Tankan survey from Bank of Japan revealed Monday.
The big manufacturers' confidence index fell to +7 in June quarter from +12 in March quarter. The score was forecast to drop moderately to +9.
Meanwhile, the non-manufacturing sentiment index rose unexpectedly to +23 from +21 a quarter ago. Economists had forecast the index to drop slightly to +20.
Consequently, the all industry sentiment index came in at +10 versus +12 in the previous quarter.
Given that the change rather than the level tends to be the best guide to GDP growth, that suggests the economy may have passed its low point, Marcel Thieliant, an economist at Capital Economics, said.
The continued deterioration in the Tankan's headline index may reignite speculation that the sales tax hike scheduled for October 1st will be delayed yet again, the economist noted. However, it is unlikely that the tax hike will be scrapped at this late hour.
The outlook indicator for large manufacturers dipped to 7 from 8 and that for large non-manufacturers slid to 17 from 20.
Big firms are planning to raise their investment by 7.4 percent in the fiscal 2019 compared to economists' forecast of 8.1 percent.
Further, the survey showed that the production capacity index rose to -3 in the second quarter from -5 in the preceding period.
Small manufacturers' sentiment index dropped to -1 from +6, which was also below the forecast of +2. Likewise, small non-manufacturers confidence index fell to 10, as expected, from 12.
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