TOKYO (Reuters) - Confidence among Japan's big manufacturers likely weakened to the lowest in two years in the three months to March and it is seen worsening further over the next quarter, a Reuters poll showed on Friday, as China's economic slowdown added to worries about sluggish global demand.
The Bank of Japan's quarterly tankan business sentiment survey is expected to show the headline index for big manufacturers' confidence worsened to plus 14 in March from plus 19 in December, the poll of 18 economists found.
The sentiment index for big non-manufacturers slipped to plus 22 in March from plus 24, according to the poll, though a positive number means optimists still outnumber pessimists.
"If the data shows worsening corporate sentiment and weak capital spending plans, market expectations for additional BOJ easing will increase," said Tsuyoshi Ueno, senior economist at NLI Research Institute.
Big manufacturers' business sentiment is seen worsening in the coming quarter to plus 12 and non-manufacturers' sentiment is likely to deteriorate to plus 20, the Reuters poll found.
Big companies were forecast to cut their capital spending plans by 0.4 percent for new fiscal year from April, the poll showed.
The Bank of Japan will publish its tankan survey at 8:50 a.m. Japan time on Monday April 1. (2350 GMT on March 31).
Reuters' monthly Tankan poll, which tracks the BOJ's closely watched tankan quarterly survey, found confidence among Japanese manufacturers hit its weakest in two-and-a-half years in March.
FACTORY OUTPUT AND RETAIL SALES
Factory output is expected to rise 1.0 percent in February from the previous month, the first gain in four months, the poll showed.
Recent drops in exports and industrial output prompted the BOJ to downgrade its views on them and the government cut its assessment on the economy for the first time in three years.
"Factory output likely rebounded after it dropped in January due to the Lunar New Year Holiday, but the pace of recovery is weak on sluggish foreign demand for semiconductor-related items," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Retail sales, which track performance of firms such as department stores, supermarkets and convenience stores, were seen rising 1.2 percent in February from a year earlier, twice the pace in January.
The trade ministry will publish the factory output and retail sales at 8:50 a.m. on Friday March 29, Japan time (2350 GMT March 28).
The poll also showed Tokyo's core consumer price index (CPI), which includes oil products but excludes fresh food prices, rose 1.1 percent in March from a year earlier, the same pace as in February and January.
Price of electricity, city gas and oil related products likely supported Tokyo's core CPI, analysts said.
The nation's jobless rate likely remained steady at 2.5 percent in February and the jobs-to-applicants ratio stood at 1.63 last month, unchanged from January, the poll found.
The government will release Tokyo's core CPI and jobs market data at 8:30 a.m. on Friday.