Japan business mood up, points to better BOJ tankan - Reuters Tankan

By Tetsushi Kajimoto and Izumi Nakagawa

TOKYO (Reuters) - Confidence among Japanese manufacturers bounced in June to match a decade-high level recorded in April and is expected to rise for several months, a Reuters survey found, providing more evidence of economic recovery.

Service-sector mood rose to a two-year high, evidence of broadening confidence, although the Reuters Tankan also found that confidence was seen slipping over the next three months.

The readings in the Reuters' monthly poll - which tracks the Bank of Japan's closely watched quarterly tankan - suggested a slight improvement in the central bank's survey due July 3, which would support the BOJ's upbeat economic outlook.

The central bank kept monetary policy steady on Friday and upgraded its assessment of private consumption for the first time in six months, signalling its confidence in an export-driven economic recovery that is gaining momentum.

In the poll of 526 large- and mid-sized firms, conducted between June 2-15 in which 250 responded, the sentiment index for manufacturers rose to 26 from 24 in May, led by materials firms such as oil refinery/ceramics and textiles/paper.

The index matched April's reading, which was the highest since August 2007, shortly before the global financial crisis. The index was up by one point from three months ago, and it was seen rising further to 29 in September.

"Machine tool makers, who are our main clients, are performing well for both external and domestic markets. The situation is good because currencies remain stable," a manager of a nonferrous metal firm wrote in the survey.

A recent run of indicators and business activity surveys have pointed to solid exports and factory output, although wage growth and household spending remain stubbornly sluggish despite a tightening job market.

The Reuters Tankan service-sector index rose to 33 from 30 in May, led by gains in real estate/construction firms and wholesalers. It was seen slipping to 28 in September. Compared with three months ago, the sentiment index was up seven points.

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

The BOJ's last tankan on April 3 showed big manufacturers' business confidence improved for a second straight quarter to hit a one-and-a-half year high, and service-sector sentiment improved for the first time in six quarters.

(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)