×

UPDATE 1-Japan business confidence hits 3-yr high - BOJ tankan

* Big manufacturers' sentiment index at plus 17 vs f'cast

+15

* Service-sector sentiment index at plus 23 vs f'cast +23

* Big firms expect to increase capex by 8.0 pct in FY2017/18

TOKYO, July 3 (Reuters) - Japanese big manufacturers' confidence improved for a third straight quarter in the three months to June to hit the highest level in more than three years, a closely-watched central bank survey showed, adding to signs the economy's recovery is gathering momentum.

The headline diffusion index (DI) measuring big manufacturers' sentiment stood at plus 17 in June, the Bank of Japan's quarterly "tankan" survey showed on Monday, improving from plus 12 in the previous survey in March.

It exceeded a median market forecast of plus 15 and was the highest since March 2014.

Big non-manufacturers' sentiment index stood at plus 23, up from plus 20 in March and matching a median market, the tankan showed. It was the second straight quarter of improvement and the highest level since December 2015.

The survey will be among factors the BOJ's nine-member board will scrutinise when it meets next month to review monetary policy and its quarterly growth and inflation estimates.

Big manufacturers and non-manufacturers expect business conditions to worsen slightly three months ahead, the survey showed, underscoring their concern on overseas economic uncertainties.

Big firms plan to raise their capital spending by 8.0 percent in the current fiscal year ending in March 2018, compared with a median market forecast for a 7.4 percent rise, the survey showed.

Japan's economy expanded at an annualised rate of 1.0 percent in the first quarter on robust exports and a boost from private consumption, prompting the BOJ to upgrade its economic assessment in April.

But consumer inflation remains subdued as companies remain wary of raising prices for fear of scaring away cost-sensitive households, underscoring the scale of the challenge the BOJ faces in achieving its ambitious 2 percent target.

Despite its optimistic economic view, the BOJ is likely to slash its inflation forecasts at a quarterly review of its projections this month, sources have told Reuters.

The tankan's sentiment diffusion indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists. (Reporting by Leika Kihara; Editing by Sam Holmes)