Japan's business sentiment in Sept hits 7-month low on soft Chinese demand: Reuters poll

By Kantaro Komiya

TOKYO (Reuters) - Business confidence at big Japanese manufacturers sank to a seven-month low in September, with managers across a wide range of sectors citing soft Chinese demand as a concern, a Reuters monthly poll showed on Wednesday.

The mood at non-manufacturers fell for a third consecutive month, to a one-year-low, according to the Reuters Tankan survey, suggesting a gloomy sentiment after the Bank of Japan (BOJ) raised interest rates in July.

The Reuters Tankan, which closely tracks the BOJ quarterly business survey, showed the sentiment index for manufacturers was at plus 4 in September, down sharply from August's plus 10 and the lowest since February's minus 1.

Manufacturers expect their business confidence to drop further to plus 3 over the next three months, the survey showed.

"Our clients' investments were falling behind schedule since they haven't recovered yet from the impact of the weak Chinese economy," a machinery maker manager wrote in the survey.

Managers of several sectors, ranging from steel to textile to electronics, cited weak demand in China as a worrisome factor to their business environment. Others referred to the global electric vehicle slowdown and raw material inflation.

China's consumer inflation accelerated in August to the fastest pace in half a year but the uptick was more due to higher food costs from weather disruptions than a recovery in domestic demand as producer price deflation worsened.

Meanwhile, some survey respondents said the semiconductor market was showing signs of a budding recovery, mainly in the high-end products, providing a glimmer of hope to their otherwise dim manufacturing business outlook.

The Reuters Tankan service-sector index dropped for a third month to plus 23 in September, from plus 24 in August. This was the lowest since the same month last year.

Some service providers, especially those facing individual consumers such as retailers and transport companies, said sagging consumption due to inflation and a stormy weather weighed on their sales.

However, the service-sector firms expect the index to rebound to plus 27 in December, helped by robust foreign tourist spending amid a relatively soft domestic demand.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.

For the latest poll, a total of 506 non-financial major companies were surveyed, in which 245 firms responded on condition of anonymity between Aug. 28 and Sept. 6.

(Reporting by Kantaro Komiya; Editing by Himani Sarkar)