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Japan manufacturers' mood hits decade-high - Tankan survey

The Reuters Tankan service-sector sentiment index slipped from the previous month's two-year high but remained relatively high
The Reuters Tankan service-sector sentiment index slipped from the previous month's two-year high but remained relatively high

Confidence among Japanese manufacturers rebounded in October to match a peak last seen in mid-2007, a Reuters poll has found.

The figures are further evidence that the economic recovery is gathering momentum helped by a weak yen and strong overseas demand. 

The monthly poll followed an earlier Bank of Japan survey that showed big manufacturers were the most optimistic about the business outlook in a decade. 

The survey results are an encouraging sign for Prime Minister Shinzo Abe ahead of an October 22 lower house election as he hopes to convince voters his reflationary policies are helping to sustain a private sector-led recovery. 

The Reuters Tankan service-sector sentiment index slipped from the previous month's two-year high but remained relatively high. 

The poll of 548 large and mid-sized companies was conducted September 28 to October 12, in which 254 firms responded. 

The sentiment index for manufacturers rose six points in October to 31, driven by producers of electrical machinery, metal products and other machinery, and oil refiners. The index matched a high last seen in June 2007. 

Service-sector sentiment fell to 30 from the previous month's two year-high of 34, dragged down by retailers. That could be a concern for private consumption, which constitutes some 60% of the economy. 

The manufacturers' and service-sector indexes were expected to fall to 24 and 28 respectively in January, reflecting concerns about North Korea, the outlook for the Chinese and US economies, and Japan's domestic politics. 

Business sentiment will be among indicators the Bank of Japan board will scrutinise when it issues fresh long-term economic and price forecasts at a rate review on October 30-31. 

Bank of Japan policymakers hope a sustained economic recovery will boost wages and consumer spending, but analysts expect inflation to remain some way off the central bank's 2% target.