The Bank of Japan's quarterly "tankan" business survey, to be released Tuesday, will show confidence among major manufacturers has risen slightly from the previous survey, according to a Kyodo News poll of economists released earlier this week.
While the ongoing war in Iraq and the sluggish stock market are creating uncertainty over the economic outlook, solid exports and corporate earnings are keeping business sentiment from deteriorating further, the economists say.
According to the poll of 28 private economists, conducted Wednesday, the BOJ gauge of business sentiment for manufacturers will likely be at minus 8 for March against minus 9 for December, marking the fourth consecutive quarter of improvement.
However, the index for nonmanufacturers will likely worsen to minus 17 from minus 16, posting the second consecutive quarter of deterioration.
The index represents the percentage of companies reporting favorable business conditions minus those reporting unfavorable conditions.
The economists surveyed also predict that major companies in all sectors will spend 4.9 percent less on plants and equipment compared with the previous fiscal year.
Masaaki Kanno, head of economic and policy research at J.P. Morgan Securities Asia Pte. in Tokyo, said there is a possibility the economic cycle may reach a peak around June.
"Uncertainty surrounding the post-Iraq war situation and sluggish stock prices are dealing a blow to corporate sentiment," Kanno said.