2018.02.1821:47:00UTC+00Japanese Manufacturers’ Confidence Worsens on Stronger Yen - Reuters Tankan

Morale among Japanese manufacturers worsened sharply in February compared to the previous month's upbeat reading, according to the Reuters Tankan poll. This implies that the yen's recent strength and global stock market turbulence have weighed down sentiment.

The monthly poll, which tracks the Bank of Japan's closely watched tankan quarterly survey, found the mood among manufacturers was expected to brighten over the coming three months but service-sector morale was seen deteriorating, a worrying signal for the domestic demand-led recovery.

The Reuters poll of 544 large- and mid-sized companies, in which 259 firms responded on condition of anonymity, comes after Japan reported in the fourth quarter its longest run of economic expansion since the 1980s boom, led by strong private consumption.

However, the recent global stock market sell-off has lifted investors' appetite for the perceived safe-haven yen, which is a worry for policymakers. A strong currency eats into Japanese manufacturers' profits and could disrupt the virtuous cycle of business investment, consumer spending and growth that authorities have struggled to set in motion.

The sentiment index for manufacturers was at 29 in February, down from the previous month's 11-year peak of 35, the survey conducted Jan. 31 to Feb. 14 found. The index is seen to increase slightly to 30 in May.

The service-sector index was steady at 33 in February, weighed by retailers, with heavy snow in some parts of Japan and widespread cold weather seen discouraging shopping. The index is expected to fall to 30 in May.