Japanese business sentiment has deteriorated across-the-board according to the widely watched Tankan survey, although the fall was not as bad as many feared and capital investment plans remain reasonably firm at large manufacturers.

The headline diffusion indices, which subtract pessimists from optimists, beat consensus forecasts, with large manufacturers falling from 11 to 5 and large non-manufacturers falling from 12 to 10. There was a sharp deterioration in sentiment at shipbuilders and steel and auto manufacturers, where companies are facing a severe margin squeeze.