By Megumi Fujikawa


TOKYO--Sentiment among large Japanese manufacturers worsened for the first time in four quarters in a Bank of Japan survey, but the keenly watched gauge also sent some positive signals amid speculation over the bank's next rate move.

The main index of sentiment among big manufacturers fell to +11 in March from +13 in the December survey, according to the central bank's quarterly tankan corporate survey released Monday. That compares with economists' forecast for +10.

The index represents the percentage of companies who said business conditions were favorable minus those who said conditions were unfavorable.

Among large manufacturers, carmakers' confidence weakened to +13 in March from December's +28. During the quarter, Toyota Motor's small-car unit, Daihatsu Motor, suspended some production and shipments amid safety-test irregularities.

Economists say that the survey still shows some bright signs for the Japanese economy, justifying the central bank's decision last month to end negative interest rates and other easing policies.

The index measuring employment conditions showed companies still experienced severe labor shortages, which likely led to historic wage increases this year. Japanese companies also expect inflation to remain around the BOJ's target for 2% over the next five years, the tankan survey showed.

For the new fiscal year that began on Monday, big firms plan to increase capital expenditures by 4%. Companies tend to revise up their spending plans toward the end of their business year.

Reflecting a recovery in domestic demand and inbound tourism, the index for large non-manufacturers' sentiment marked the eighth consecutive quarter of improvement and the highest reading since August 1991, rising to +34 in March from +32 in the December survey.

"With speculation over additional rate increases already appearing in the markets, the BOJ tankan survey in June and later will be a very important indicator to watch, in order to judge such action is appropriate," said Mizuho Securities chief market economist Yasunari Ueno.


Write to Megumi Fujikawa megumi.fujikawa@wsj.com


(END) Dow Jones Newswires

03-31-24 2252ET