Japanese business morale slipped during the September quarter, according to the closely watched Tankan survey conducted by the Bank of Japan (BOJ).
The headline index measuring sentiment among large manufacturing firms slipped to +12, a reading below the +15 level of the June quarter and expectations for a decline to +13.
Looking ahead to the December quarter, sentiment looks set to weaken further with the separate outlook index falling to +10. The figure matched market expectations but was significantly below the +16 level of Q2.
While sentiment in large manufacturing firms deteriorated, fitting with the improvement in recent services PMI reports, sentiment among large non-manufacturing firms jumped to +25 from +23 in the June quarter, easily beating expectations for a drop to +23.
Putting that figure into perspective, the last time a reading this high was seen was back in the September quarter of 1991, 24 years ago.
Despite the sharp uplift recorded, like large manufacturers, sentiment towards the December quarter moderated, falling to +19 from +21 reported previously.
Adding to the optimism expressed by non-manufacturing firms, business spending expectations soared over the quarter. Large firms outlined plans to increase capital expenditure by 10.9% in the current fiscal year, easily exceeding forecasts for growth of 8.7%.
The uplift in spending was higher than the 9.3% forecast of the June quarter and was the largest annual increase reported since the December quarter of 2006.