Confidence among Japan's big manufacturers deteriorated for the first time in seven quarters, although their capital spending plans were revised higher, the Bank of Japan's "tankan" survey for December showed today.
Suggesting Japan's economic recovery is losing steam amid slower demand for high-tech goods, a strong yen and high oil prices, the survey's headline diffusion index (DI) for big manufacturers slipped to plus 22 from September's plus 26, which was the highest reading since the early 1990s.
It was a touch below a consensus forecast for plus 23 and follows a series of downbeat indicators in the last few months. Still, economists noted that upward revisions to companies' capital spending plans were good news, and the yen rose more than a quarter percent against the dollar immediately after the data's release.
"The numbers show that the economy is slowing but should not be a surprise as they were within expectations," said Mr Soichi Okuda, a senior economist at Sumitomo Shoji Research Institute.
"We shouldn't be overly pessimistic about the economy. Capex has been revised upward so the economic slowdown isn't having an effect on corporate planning."
Economists said steps by China's government to prevent its economy from overheating were gradually dampening Chinese imports of Japanese products - one of the main drivers of Japan's economic revival of the last few years.
Still, the survey, covering 10,227 companies, showed that confidence had yet to deteriorate as much as the worst fears.
The tankan showed employment improving and expected to improve further in the coming months, which economists said could support domestic consumption - the biggest chunk of Japan's economy.
The tankan was being watched closely in financial markets for clues on the state of Japan's economy after data earlier this month showed GDP grew only 0.1 per cent in July-September compared with the preceding three months.
The Tokyo stock market's Nikkei average opened 0.34 per cent higher at 10,952.71, while the yield on the benchmark 10-year Japanese government bond opened 0.005 percentage point higher at 1.365 per cent.
The tankan indices measure sentiment by subtracting the percentage of companies reporting unfavourable conditions from those that say they are favourable.