A key quarterly index of confidence showed Monday that major Japanese manufacturers are upbeat about the prospect of the world's second-largest economy.

The business sentiment index, or Tankan survey, compiled by the Bank of Japan grew to 19 for major manufacturers in the third quarter of this year, up from 18 in June.

The index represents the percentage of companies reporting favorable business conditions minus the percentage of those reporting unfavorable conditions.

Meanwhile, the index for major non-manufacturers was at 15, unchanged from that in June.

Although both were below pervious predictions, the index for manufacturers was the highest since December 2004 when it stood at 22.

As for confidence among mid- and small-sized manufacturers, the index moved up from 2 to 3.

The index also slightly improved for smaller non-manufacturers from minus 12 to minus 11.

Looking ahead, the index for large manufacturers is projected to inch down to 18 in the next quarter and that for major non-manufacturers is forecast to climb to 16.

Major manufacturers plan to spend 16.2 percent more on plant and equipment in fiscal 2005 than in the previous year, unchanged from the previous survey.

Large non-manufacturers plan to spend 5.9 percent more, revised down by 0.2 percentage point from the previous survey.

In contrast, small and midsize manufacturers plan to spend 3.7 percent less on capital investment than in fiscal 2004 and non-manufacturers in the same category plan to spend 1.8 percent less.

Sales by major manufacturers are projected to rise 3.9 percent in fiscal 2005 and those by major non-manufacturers by 2.1 percent.

Pretax profits of major manufacturers are projected to gain 3.5 percent in the current fiscal year and those of non-manufacturers by 0.8 percent. The diffusion index for employment conditions at big firms in all industries registered minus 1 and is projected to fall to minus 4 in the three months to December.

The index is calculated by the percentage of companies reporting having an excess of labor minus the percentage of those reporting a shortage.

It is the first time that the index has moved into negative territory since August 1992.

The survey was carried out between Aug. 30 and Sept. 30 and covered 10,201 companies, of which 98.0 percent responded.

Source: Xinhua