Japan's manufacturing confidence slips on worries about China slowdown

Japan's manufacturing confidence fell in January and is expected to remain subdued for the next three months, a Reuters poll showed, suggesting worries about a further slowdown in China-led global growth and market turmoil have hit exporters' confidence. Confidence in the services sector rose but is expected to fall again, Reuters monthly tankan data showed, underscoring the fragile domestic demand. The survey is closely linked to the Bank of Japan's quarterly Tankan survey. A total of 272 companies responded to the survey of 514 medium and large enterprises from January 5 to January 15. The results reflect the impact of China's economic slowdown and local financial market volatility. The survey comes as the new year gets off to a tense start as crude oil and commodity prices tumble. The loss of confidence could kill policymakers' hopes for a virtuous growth cycle -- rising incomes and buoyant private sector spending. A virtuous cycle of growth is needed for Japan's economy to emerge from 20 years of deflation and economic stagnation. 'Despite a slight increase in sales to domestic customers and firm sales to U.S. customers, sales to Asia are still low, and sales to China in particular have fallen sharply,' a manager at a rubber maker said in response to a survey. The companies are not named. 'Large-scale capital expenditures in Japan and abroad are falling. Overall, manufacturers are pessimistic about the future,' said a manager at an electronics maker. The Reuters Tankan survey showed that the manufacturing sentiment judgment index fell to plus 6 in January from plus 9 in December, as export industries such as steel, electrical machinery and precision machinery brought pressure. The index is expected to be flat in April. The service sector sentiment judgment index rose to plus 27 from plus 18 in December, the first rise in three months, driven by improved conditions in retail, real estate/construction and information/communication companies. But the index is expected to fall to plus 23 in April. The Bank of Japan's tankan report released in December showed that business confidence was stable, but it is expected to deteriorate in the next three months, reflecting the slowdown in growth in emerging economies.