Confidence among large Japanese manufacturers is probably at its highest in 21 months as companies plan fewer cuts in investment and consumer demand revives, analysts said.
The Bank of Japan's quarterly "tankan" index for large manufacturers -- set for release today -- will probably register minus 26, an improvement from minus 37 in the June survey, according to an average of 18 economists polled by Bloomberg News.
There hasn't been a positive index reading since September 1997.
"Japan is at the start of the recovery phase," said Lawrence Duke, head of Citibank NA's global markets strategy group in Tokyo.
"Tankan is going to show significant improvement."
Business confidence is being helped by economic recovery, companies' better earnings prospects and progress in shedding money-losing businesses.
Further down the line, the yen's rise and slacker government spending may act as a brake on future increases in confidence, yet most economists expect the December survey to show some improvement over the September index.
Economists polled by Bloomberg expect the index for large manufacturers to rise to an average of minus 19 in December.
The Bank of Japan will release the survey at 8:50am today, Japan time. The most widely watched index subtracts the percentage of companies that are pessimistic from those that are upbeat.
Economists consider the survey the broadest indicator of business confidence because it gauges 9,500 companies' views of current and future business conditions and earnings prospects.
Japan's economy grew 0.2 percent in the April-June quarter, following an increase of 2 percent between January and March. The two quarters of growth brought to an end the nation's longest recession in five decades.
With the economy on the mend, companies aren't as keen to slash investment.
The tankan will probably show large businesses plan to shave spending 7 percent in the year ending March 31. That's better than the 7.9 percent decline companies forecast in June.
Smaller companies will probably cut capital spending by 19 percent in the year through March, economists said.
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