(Restores dropped word in opening paragraph)
* Big manufacturers’ sentiment +6 vs poll +8, pvs +6
* Non-manufacturers’ sentiment +18 vs poll +18, pvs +19
* Big firms’ FY2016 capex seen up 6.3 pct
By Leika Kihara and Tetsushi Kajimoto
TOKYO, Oct 3 (Reuters) - Confidence among big Japanese manufacturers was flat in the three months to September and service-sector sentiment worsened to its lowest in nearly two years, the Bank of Japan’s closely watched tankan survey showed on Monday, underscoring a fragile economic recovery.
Big firms plan to raise capital expenditure in the current fiscal year, the tankan survey showed, offering some relief to policy-makers hoping the Bank of Japan’s aggressive stimulus will boost business investment.
The results followed a mixed run of recent indicators that underscored fragile growth, keeping the BOJ under pressure to do more to hit its 2 percent inflation target - even as doubts grow over whether years of massive money-printing are doing any good.
The headline index gauging big manufacturers’ sentiment stood at plus 6 in September, unchanged from three months ago and roughly in line with a median market forecast of plus 7, the quarterly survey showed.
Big non-manufacturers’ sentiment slipped to plus 18 from plus 19 three months ago, falling for three straight quarters and hitting the lowest level since December 2014. Markets had expected a reading of plus 18.
Big firms plan to raise capital spending by 6.3 percent for this fiscal year to March from year-before levels, largely unchanged from three months ago. Markets had expected a 6.8 percent rise.
Big manufacturers based their business plans on the assumption the dollar would average 107.92 yen in the current fiscal year, down from 111.41 yen forecast three months ago.
The revised level, however, is still much higher than recent dollar/yen levels of around 101, suggesting that company profits could be revised down.
The yen’s gains are curbing prices of imported goods, which may help boost household purchasing power but complicate the task for the BOJ to accelerate inflation to its 2 percent target.
The tankan’s sentiment 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 and Tetsushi Kajimoto; Editing by Eric Meijer