* Big manufacturers' sentiment index at plus 25 vs f'cast
* Service-sector sentiment at plus 23, matches f'cast
* Firms expect conditions worsen 3 months ahead - tankan
* Big firms expect capex to rise 7.4 pct vs f'cast +7.5 pct
(Adds context, detail)
By Leika Kihara and Tetsushi Kajimoto
TOKYO, Dec 15 (Reuters) - Japanese business confidence
improved for a fifth straight quarter in the three months to
December to hit an 11-year high, a central bank survey showed, a
sign the economy is gathering momentum from robust exports and
booming corporate profits.
But big manufacturers and non-manufacturers expect business
conditions to worsen in the next three months, highlighting
their reluctance to embrace the improved operating environment
via increases in wages and investment.
Nudging cash-rich firms into spending more on wages has been
a priority for premier Shinzo Abe's efforts to vanquish the
deflation that has plagued Japan for nearly two decades.
As part of those efforts, Abe's ruling coalition approved a
plan on Thursday to slash the corporate tax rate - but only for
companies that increase spending - a move that could brighten
business sentiment in coming months.
The closely watched "tankan" survey also showed capacity
constraints and staff shortages were increasing price pressures,
which would help the Bank of Japan achieve its elusive 2 percent
target but could squeeze corporate margins ahead.
Still, many analysts doubt wages will rise much and
therefore expect any interest rate hikes to be some time away.
"The tankan results support the BOJ's bullish economic view
backed by global economic recovery," said Hidenobu Tokuda,
senior economist at Mizuho Research Institute.
"But prices remain weak and far below the BOJ's price
target. There's no way it can move to tighten policy anytime
soon," he said.
The headline index for big manufacturers' sentiment stood at
plus 25 in December, the tankan showed on Friday, up from plus
22 in September and slightly higher than a median market
forecast for plus 24.
It matched the high reached in December 2006, when a booming
economy allowed the BOJ to end a previous spell of quantitative
easing and zero interest rates.
An index measuring big non-manufacturers' sentiment was
unchanged from September at plus 23, matching forecasts.
Big firms expect to increase capital expenditure for the
current fiscal year to March 2018 by 7.4 percent, roughly in
line with forecasts, the tankan showed.
PRICE PRESSURE BUILDING
The tankan showed that conditions for price and wage gains
were gradually falling into place.
An index measuring employment conditions showed firms were
faced with the most severe staff shortages since 1992, while
their capacity to meet demand was at its tightest since 1991.
An index gauging output prices hit a nine-year high for big
manufacturers, a sign that more large companies were in a
position to raise prices - reflecting strong demand.
But analysts doubt whether the outlook for consumer prices
will change much.
"Even looking at these figures, it doesn't provide enough
energy for the BOJ to change its policy, such as, for example,
changing its yield curve target or negative rates," said Hiroaki
Muto, an economist at Tokai Tokyo Research Center.
The tankan will be among key data the BOJ will scrutinise at
its next rate review on Dec. 20-21.
Japan's economy expanded an annualised 2.5 percent in the
July-September period to mark a seventh straight quarter of
expansion, supporting the central bank's recent signals that it
could move away from crisis-era monetary policy.
But many analysts expect core consumer inflation, now at 0.8
percent, to slow next year unless firms pay heed to Abe's calls
to hike wages by 3 percent.
(Reporting by Leika Kihara; Editing by Eric Meijer)
First Published: 2017-12-15 02:03:44
Updated 2017-12-15 04:33:20
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