The Bank of Japan's (BOJ) closely watched business sentiment survey, known as the Tankan, revealed the mood among big manufacturers was unchanged during the third quarter. But the Japanese market rose, signaling relief that sentiment had at least not worsened.
Released before the market open on Monday, the headline index showed sentiment among large manufacturers at plus-6 points, flat on the previous quarter's reading and below a Reuters forecast for plus-7 points. For the fourth quarter, the BOJ anticipated sentiment would remain steady at plus-6.
Sentiment in the service sector, meanwhile, worsened to plus-18 from plus-19 in the second quarter, meeting Reuters' estimates. It was the third straight quarterly deterioration and the lowest reading since December 2014. For the quarter ahead, the central bank expected a reading of plus-16.
In reaction, the yen weakened to 101.57 per dollar from 101.41 previously, while the Nikkei benchmark equity index was nearly 1 percent higher in early trade.
"The market is just thankful that the numbers aren't worse off," Mandeep Nalwa, CEO of Taurus Wealth Advisors, told CNBC's "Squawk Box."
"There's little belief that the situation will change dramatically going forward."
The need to spend more
For the fiscal year to March 2017, big manufacturers estimated a 6.3 percent rise in capital expenditure, below Reuters estimates for a 6.8 percent spike.
Small manufacturers, meanwhile, anticipated a 9 percent drop, worse than the 8.4 percent fall a Reuters poll predicted.
"We judge these capex plans as not strong, but not weak. Still, there is a downside risk of the capex plan if the manufacturers' profits deteriorate further," J.P. Morgan stated in a Monday report.
Corporate spending plays an essential role on Japan's economic outlook.
Cash held by companies accounted for as much 125 percent of gross domestic product, or $6 trillion, explained Kotaro Tamura, Asia Fellow at the Milken Institute. This capital could help move the economy if spent, said Tamura, a former senator and parliamentary secretary in charge of economic and fiscal policy at Japan's Cabinet Office.
Prime Minister Shinzo Abe's administration has been increasingly pushing the corporate sector to invest in technology development or increase employee compensation, Tamura noted, in a bid to fire economic growth.