Japanese confidence is up, but by less than expected

The Bank of Japan's key tankan survey of sentiment among big manufacturers showed a positive balance of 19 for the three months to the end of September.

This compared with +18 for the previous quarter and with the +20 balance which had been expected by the markets.

Japanese shares and the yen both fell after the publication of the report.

By mid-afternoon trading, the Nikkei 225 index of leading stocks was down 22 points to 13,552, while the yen had dropped to a 16-month low against the US dollar.

Growing economy

The Bank of Japan's tankan survey comes to its figure by subtracting the percentage of firms reporting unfavourable conditions from those reporting favourable ones.

"It [the latest business confidence survey] was slightly softer than expected, likely due to a rise in input costs and higher energy prices," said Masaaki Nanno, managing director of research at JP Morgan.

High global oil prices are being driven by strong demand, particularly from China.

The recent hurricanes in the US have also kept prices high after they damaged a number of refineries in the Gulf of Mexico.

A separate report from the Ministry of Finance showed last week that Japan's economy grew in August, boosted by a rise in household spending and a decline in unemployment.