BOJ tankan seen showing manufacturers' mood at strongest in a decade

TOKYO (Reuters) - Japanese big manufacturers' confidence was expected to inch higher in September to hit its highest level in decade thanks to the upbeat global economy.

However, it was expected to worsen in the coming quarter given an outlook clouded by geopolitical risks.

The Bank of Japan's quarterly tankan business sentiment survey is expected to show the headline index for big manufacturers' sentiment rising by a point to plus 18 in September, a Reuters' poll of 20 economists showed on Friday.

That would be the fourth straight quarterly improvement and the strongest reading since December 2007 when the index was at 19.

The poll found that the sentiment index for big non-manufacturers' was expected to stay steady at plus 23 in September.

"We expect big manufacturers' mood to improve slightly, led by strong exports and factory output as the global economy picks up. And the domestic auto market recovery was also a tailwind," said Tsuyoshi Ueno, senior economist at NLI Research Institute.

He added that upbeat consumption by foreign visitors and redevelopment in big cities underpinned the big non-manufacturers' mood.

But business confidence for both the big manufacturers and non-manufacturers is seen deteriorating in the coming quarter.

The sentiment index for big manufacturers is seen slipping to plus 16 in the next three months, and that of big non-manufacturers is expected to worsen to plus 20, the poll showed.

"Concerns for the future will likely weigh on business sentiment in a wide range. There are many factors to worry about," Ueno said.

He said uncertainty over U.S. policies remains strong, the North Korea situation may get tense, and there were also concerns over a possible slowdown in China's economy after the Communist Party congress.

Long periods of rain in August and sluggish wage growth could raise worries about the sustainability of a recovery in consumption, Ueno added.

Big corporations are seen raising their planned capital in the fiscal year to March 2018 by 8.3 percent, slightly up from the 8.0 percent seen in the June survey.

The BOJ will announce the quarterly tankan survey results at 8:50 a.m. on October 2 (2350 GMT on October 1).

CPI, CONSUMER SPENDING AND JOBS DATA

The poll showed the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, was expected to gain by 0.7 percent in August, up for an eighth straight month on rising electricity and gasoline prices.

Industrial production was seen likely to rise 1.9 percent in August, the poll showed, up from a 0.8 percent decline in July.

Retail sales are expected to show an annual 2.6 percent gain in August, up for a 10th straight month.

Household spending is expected to rise 1.0 percent from a year ago versus a 0.2 percent slip in July, according to the poll.

The jobs-to-applicants ratio was expected to improve at 1.53 in August, matching the level last seen in February 1974, while the jobless rate was seen unchanged at 2.8 percent.The internal affairs ministry will announce core CPI, household spending and jobs market data at 8:30 a.m. on Friday (23:30 GMT on Thursday).

The trade ministry will announce retail sales and industrial production at 8:50 a.m. on Friday.

(Reporting by Kaori Kaneko; Editing by Eric Meijer)