Japan manufacturers' confidence rises in Oct, concerns over China linger

By Makiko Yamazaki

TOKYO (Reuters) - Japanese manufacturers turned more confident about business conditions in October, a Reuters monthly poll showed on Wednesday, but they remained wary about the pace of China's economic recovery.

The service sector's mood eased, the survey showed, reflecting patchy economic conditions in Japan.

The Reuters Tankan, which closely tracks the Bank of Japan quarterly business survey, showed the sentiment index for manufacturers was at plus 7 in October, up from September's plus 4.

For the latest poll, 506 non-financial major companies were surveyed, and 241 firms responded on condition of anonymity between Sept. 25 and Oct. 4.

China, which is Japan's second-biggest export destination after the U.S., began announcing aggressive economic stimulus efforts on Sept. 24.

A wide range of Japanese sectors reported improvements in business confidence, with chemicals and food leading the gains.

"We are seeing a stronger-than-expected rebound in the electronics materials sector," a chemicals maker manager said in the poll.

Business has been particularly strong for memory chip makers, a manager at an electronics maker said.

Manufacturers expect their business confidence to rise further to plus 9 over the next three months, the survey showed.

But managers across multiple sectors voiced concerns about the weak Chinese economy.

"Our clients are growing cautious about raising capital expenditures due to a Chinese economic slowdown," a machinery maker manager said.

The Reuters Tankan service-sector index dropped for a fourth month to plus 20 in October, from plus 23 in September, with the transport and wholesale sectors seeing the biggest drops in the mood. This was the lowest since February last year.

"We have been unable to fully pass on higher energy costs and currency impacts to pricing," a wholesaler manager wrote.

The slowing Chinese economy, unstable weather and a stronger yen were also among reasons cited by non-manufacturers for lower business confidence.

However, the service-sector firms expect the index to rebound to plus 22 in January, helped by robust investment in information systems and foreign tourist spending.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.

(Reporting by Makiko Yamazaki; Editing by Jamie Freed)