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A closely watched Bank of Japan business survey due out Monday is expected to show significant deterioration in confidence among major manufacturers, according to a Kyodo News survey of 27 economists.

The BOJ’s “tankan” quarterly survey for June is expected to reaffirm that falling exports resulting from slowing economies abroad, especially the United States, have severely hit local manufacturers, economists said.

Many economists forecast that business sentiment among major nonmanufacturers and among small and medium-size companies has also deteriorated further.

The Kyodo survey shows economists predict the business sentiment index for large manufacturers in the June tankan report will come in at minus 17 on average, compared with minus five in March, for a second consecutive quarter of decline.

They said the continued deterioration will show that the plunge in Tokyo stocks and reduced demand for information technology equipment are having a major negative effect.

The index is calculated by subtracting the percentage of companies reporting better business conditions from the percentage reporting otherwise. A minus reading means more firms are pessimistic than optimistic.

The economists said the business sentiment index for small and medium-size manufacturers will likely come in at minus 35 on average for this quarter, compared with minus 27 in the previous survey.

Looking ahead, the economists project that the index for large manufacturers will stand at minus 19 in September, while that for small and medium-size makers will be minus 39.

“Corporate confidence continues to deteriorate,” said Makoto Yamashita, a strategist at Sanwa Securities Co.

“The odds are that expectations for a further credit-easing by the BOJ will grow.”

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